If you’re looking to get started with investing, there are probably some common terms you may be wondering about. One very popular option is known as a mutual fund. These funds take money from hundreds or even thousands of people and invest it into everything from stocks to bonds to securities and more, representing a single portfolio. When returns come in, they are split up proportionally across investors, with the mutual fund manager taking their percentage.
There are a number of advantages to going this route. One is that mutual funds make it very easy to diversify your portfolio automatically. Most mutual funds cost less than a few thousand dollars to get started. That small of an investment gives you access to all kinds of stocks from the categories mentioned above and more. On your own, it would cost several times more to achieve the same in diversification.
That being said, there are still plenty of options where mutual funds are concerned so that you can make sure your money is going in a direction you approve of. For example, some mutual funds are focused on growth, meaning their portfolio represents burgeoning companies. Other times, shares are for a certain sector, which is good for people who may think health or technology has a particular degree of promise.
This also means you can find all kinds of mutual funds depending on your goals. If you want safe, long-term investments, you can put your money into mutual funds that rely on government bonds. On the other side of the spectrum, there are also plenty of mutual funds that come with greater risk, but also promise the potential of far greater rewards.
So, whether you’re on a budget or not, investing in mutual funds comes with a lot of positives. They’ll really stretch your dollar, while still giving you plenty to be happy about.
Source:
http://money.cnn.com/magazines/moneymag/money101/lesson6/
