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 nderstand these facts about mutual funds before you begin investing:1. Mutual funds are the most appropriate investments for most people. Investing requires a great deal of time and expertise. Most investors lack both time and the specific knowledge required to manage an investment portfolio. Mutual funds provide low-cost access to the professional expertise required to manage your investments successfully. 2. Mutual funds provide instant diversification. The most important aspect of any investment program is diversification. Just ask the employees of Enron or United Airlines who held large quantities of their employers' (now nearly worthless) stock. It takes much more money than the typical investor has to build a properly diversified portfolio. Mutual funds reduce your risk by diversifying for you. 3. Mutual funds make it convenient and inexpensive to manage asset allocation. Most fund families include multiple funds in different asset classes (growth stocks, municiple bonds, etc.). Transfers between funds are usually free of charge. 4. Mutual funds simplify your tax accounting and record keeping. 5. Mutual funds, like any investment, should be investigated carefully. It is important to check the history and management of the funds you are considering. Special attention should be paid to sales charges, expense ratios, and turnover rates. And remember that Golden Rule: "Past success is no guarantee of future performance." Chartered Financial Analyst (CFA®) Jim Haring is Founder and President of Schubert Financial Associates. |
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