Mutual funds are companies that pool money from various contributors and invest the money in stocks and bonds. Investors can buy shares from mutual funds to add to their investment portfolio. Investors own a piece of their mutual fund and the money that it generates.
- Money Market Funds: open-ended, generally safe mutual funds that invest in short-term debts.
- Bond Funds: Produce higher risks and rewards, because they invest in various types of bonds.
- Stock Funds: Invest in various types of corporate stocks.
- Target Funds: Invest in various types of corporate stocks.
There are various risks and rewards involved in mutual funds. It is important that you do not run head-first into deciding what type of mutual fund to invest in.
Here are some questions that you need to ask yourself when researching mutual funds:
- What are you hoping to achieve? It’s important to know what your financial goal is before researching different mutual funds. Specific mutual funds will be able to help you meet your goals. Sit down with your financial advisors and tell them exactly what you need.
- How much risk are you willing to take? If you know that you want to achieve some goal, you may be willing to take more risks in order to reach it. If, however, you simply want a safe place to store your wealth, you should look into less risky mutual funds. Ideally your financial goals and the risks you are willing to take should come together in your financial portfolio.
- How much will the fund cost and how much will it earn? That is what everyone who invests is hoping to achieve: a balance between risk and profit. If your investments are not gaining you anything, then you need to re-evaluate your financial situation. You might want to think twice if you lose more money buying a mutual fund then you stand to earn in the near future.
- Who runs the fund? A mutual funds success is in the hands of who is in charge of it. This concept might be hard to wrap your head around at first. The past performance of one mutual fund does not necessarily guarantee future growth.
- What tax advantages will you gain?Some mutual funds are more tax-efficient than others. No one enjoys it when taxes take a bite out of your money. This is especially important if you are planning on using your investments as a regular source of income. Make sure to spend time discussing how your mutual funds will affect your taxes.
Our professionals are determined to help each and every one of our clients protect and grow their wealth. Contact us today for help deciding which mutual funds to invest in.