Buy Mutual Funds
If you are looking to buy mutual funds then you should be aware of the different types of mutual funds that are available. The different types of mutual funds are explained in today’s article as well as some pros and cons to mutual funds.
Bond Funds – bond mutual funds are pooled amounts of money that are invested into bonds. Bonds are actually IOUs issued by companies or governments where the purchaser of the bonds is lending money to the issuer. The purchaser typically collects some regular fixed interest payments until the money is returned.
Balanced Funds – balanced funds mix some stocks and bonds together. Most of the time the balanced fund contains about half to more than half of stocks and the rest of the shareholder’s money is in bonds and cash. When you buy mutual funds of this nature you must understand the balance of distribution in order to fully understand the risks involved.
General Equity (Stock) Funds – this type of fund represents stock ownership (part), or equity in corporations. Many mutual funds invest primarily in either small, medium, or large stocks as it relates to market capitalization. As a result these mutual funds are categorized as small-cap (small-cap stocks), mid-cap, or large-cap funds (large-cap stocks).
Sector Funds – these funds invest in one particular sector of the economy such as computers, banking, technology, etc. These funds can be very volatile due to their broad market nature so you must be careful when investing in mutual funds of this nature.
International and Global Funds – global and international funds invest in companies that are foreign and domestic. Global funds may invest in some U.S. based companies in addition to foreign companies while international funds typically only invest in foreign companies. International funds are typically more volatile than domestic funds.
Index funds – index funds match the shareholdings of a target index and are different from actively managed mutual funds. Index mutual funds own a full participation in some portion of the stock market. When you buy mutual funds of this nature, you don not pick stocks, nor does anyone pick stocks for you. The goal is to replicate the returns of the specific index.
Mutual funds provide great portfolio diversification since you are invested in several different companies. They are also very liquid like stocks and mutual funds investments can be converted into cash quickly.
Just be sure that you understand that mutual funds buy their costs and there are annual fees. Also, mutual funds managers provide your stock picks and they may be no better -than the average non-professional so do your homework.
Market Direction: Due to travel conflicts, there will not be a Market Direction or a Member Stock Chat tonight. We apologize for the inconvenience.
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