There are many, many different types of mutual funds. But,
before you invest you should understand exactly what a mutual
fund is, what it means, and how to use a quality mutual fund
for a successful retirement.
Recently, a young girl called me and told
me she heard some bad things about mutual funds on the news.
I told her that
was true, but just like everything else I informed her she
must put it in perspective. What they were referring to was
a small number of mutual fund companies where managers were
caught showing favoritism in trades(buys and sells) to their favorite
customers.
It worked like this, the market for buying and selling investments
closes at 4pm, say you purchase a mutual fund at 3:55, technically
that trade should be placed immediately. Instead, they would
stack
up these trades, then they would place trades of their favorite
customers, which I am sure included their families and friends.
These trades were sometimes placed after the trading time
was cut
off at past 4pm. Then, after their favorite customers trades
were placed they would place the trades of their not so favorite
customers and the prices would go up, but only the previous
favorite customers would benefit from the price increase
since they were already in the market.
Only a small number of companies have been caught doing
this, but they received a large amount of press coverage,
so don't be dismayed. There are a huge number of very good
mutual fund companies that are honest and provide an excellent
product.
Mutual funds are one of the simplest ways to invest, provided
you understand the simple mutual funds.
One of the best uses of Mutual Funds is an Individual Retirement
Account or IRA. Since social security is not guaranteed for
the future and many companies do not offer retirement. It
is important to put some money into either a Roth IRA or
Regular IRA. There are some Mutual Fund companies that have
a minimum contribution of $250 to fund an IRA account. That
amount is affordable for almost everyone so there is no excuse,
get started.
Related Links:
Retirement and Investing
Low-cost, low-fee, no-load mutual funds
Lois Center-Shabazz
is the founder of MsFinancialSavvy.com and author of the
3-time award-winning personal finance book, Let's Get Financial
Savvy! ISBN #0971979502.
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