Here are three facts that are the bare bone necessities to know before you start to invest in mutual funds. In this series, I will give you information little by little about mutual funds until I feel you have a great grasp on the topic, and can choose your own high quality funds.
1. WHAT IS A MUTUAL FUND?
A mutual fund combines money from several investors to invest in different types of investments or investment companies. The investments could be stocks, bonds, money market instruments’ or other types of investments.
Each investor in the mutual fund hold a proportion of the investment in the way of shares. There are low-risk, mid-risk and high risk mutual fund companies, as well as low earning and high earning companies.
One mutual fund company is typically very diversified and can invest in as many as 400 companies or as few as 40 companies. Diversity is what takes much of the risk out of mutual funds.
2. HOW DO I PURCHASE A MUTUAL FUND?
Stocks are purchased from stock exchanges, such as the New York Stock Exchange, usually through a brokerage office or online broker. Mutual funds are baskets of stocks and can be purchased from a variety of places.
Mutual fund shares are purchased from the mutual fund company itself or from a broker. When you are educated in mutual funds, which I intend to do, you can easily purchase your own mutual funds online at any number of investment companies.
3. WHO OVERSEES THE MUTUAL FUNDS I INVEST IN?
Registered and licensed Investment Advisers, in a team or individually, manage investment portfolios of mutual funds.
Investors have an advantage, by using the expertise and experience of the advisers.
You can go to sec.gov or finra.org to verify that your adviser is a registered investment adviser.