investing in your future
What Are Mutual Funds?
Mutual funds can provide similar returns to investing in stocks on your own, but with more help, less work, and generally less risk. How does this stock option work?
- You buy random stocks which are managed by an online firm.
- You invest in a fund where your money is pooled with that of other investors and is managed by a group of financial professionals.
- You invest in stocks with one company and buy insurance to cover any risk.
“B” is correct. Almost half of American households have money invested this way. Mutual fund portfolios normally include a mix of investments (stocks, bonds, real estate, etc.) and are set up to accomplish specific investor goals. Because the funds are diversified, they generally are less volatile, limiting your risk. But the convenience and expertise you receive isn’t free. Mutual funds charge fees and may deduct their operating expenses from fund assets. This reduces the amount of money you make.