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Mutual Funds Basics

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Mutual Funds Basics

Mutual funds are simply a basket of stocks and bonds put together and given a name by a company. You might have heard of the Oppenheimer Funds, Fidelity Investment, The Vanguard Group, T. Rowe Price among hundreds of others. These are all mutual fund companies that one can invest in if they like their products and services. The Best Mutual Fund in my opinion is The Vanguard Group. They keep it simple and their fees in not expensive, one can easily open an account with as little of $500.00 online or over the phone.

The best mutual funds companies have lots and lots of funds to invest in. The funds are created by category such as small cap, mid cap and large cap or a mix and all three. There are funds by sector such as; energy, precious metals, health care and emerging markets (Brazil, Russia, India and China among others). Mutual funds are everywhere and no one is better than the other, but I would use caution in this economic climate. Each of these companies will compete for your money like any other company doing business.

There are literally hundreds if not thousands of mutual fund companies competing for your hard earned dollars. Mutual funds are also considered institutional investors since they buy huge amounts of stocks in companies. They have their own researchers, analysts and managers that study the markets and companies to determine whether stocks should be purchased for their funds. 401k plans, pension plans and other plans are also considered institutional investors and/or mutual funds since they all buy stocks in companies. Institutional Investors are actually the ones that move the markets either up or down. The individual investor rarely has the ability to move the markets. The only exception is a large shareholder that owns millions of share of any particular company.

Individuals invest in their company’s 401k, IRA and pension plans since it is a lot easier to invest this way. Individuals are not risking their hard earned money by purchasing individual stock, so losing your money is minimized by mutual fund investing. However, lately that might not be the case. It is a great way to invest and the easiest so don’t think too much about it. The important thing to remember is that you start investing. As you learn more and more, you can easily shift or move your money around. In today’s market, I would go easy and not invest in financial stocks (banks).

Remember keep saving and don’t keep all of your money in one account, diversify.

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