How do mutual funds work???

Question

yea i am deffinatley interested in investing and i am trying to find out as much as i possibly can about different types of investing....my questions are:
- How do they work?
- How much of a profit?
- How long of a wait?
and please answer in plain english a bunch of long fancy words won't help me one little bit! thanks bunches (ia) KP

Answer 1

A mutual fund basically pools your money with other people's so they can buy a wider variety of stocks. This lessens the downside compared to buying just a couple stocks, which is all many small investors would be able to afford - if the one or two you owned go down a lot, you could be wiped out.

The downside of a mutual fund is that you aren't likely to see the big gains you might see if you get real lucky and pick the next Microsoft or something before they skyrocket.

Mutual funds do charge fees. Some are load funds, which means you're paying a percentage of your total money invested just to get in (or sometimes out), some are no-load which means you don't pay this commission, but they all charge annual fees to cover their expenses and profit.

Each mutual fund has a particular goal and set of rules they invest by. Some are very aggressive, which means they buy things that are more likely to go up a lot - unfortunately, those are also likely to go down a lot. Some are very conservative, buying things that probably will stay steady and make money gradually - even those can go down if things go badly. These goals and strategies, and the fund's fees, are detailed for each fund in their prospectus, which is a brochure they have to give you before you invest.

For a new investor especially, mutual funds can make a lot of sense - yes, you pay fees, but for that fee you're getting the expertise of someone who has a lot of investing experience and has access to research information the average person doesn't.

There are large companies who have a number of mutual funds, called "families" of mutual funds - usually their funds will have widely differing investment objectives and strategies. There are funds called index funds - these buy the individual stocks in some widely-used index like the DOW - with one of those, your profit or loss will pretty much follow the index, which can be good or bad depending on what the index is doing.

Financial magazines usually have an issue at least once a year that rates the various large mutual funds for performance, often for over the last 1, 5 and 10 years. These articles usually also show how much that fund's fees are per year, and rate them in up markets (value overall increasing) and in down markets. Warning - just because a fund did well last year doesn't mean they necessarily will again next year. But a fund that has done consistently well for years is usually a better bet than one that hasn't. Your local library should have copies of back issues of magazines that can give you that information.

Answer 2

This is one of the WORST investments to ever come down the pike ! You are usually never made aware of "fund charges and fees" until the end when you want to get out. The fund managers make a killing. Please, if you do not want to pick your own stocks, try to become informed about Exchange Traded Funds,
same thing, without the fees and ad agencies lies.

Start studying, not every stock, but 5 or 6 and see if they fill a good need, buy lightly, study hard. Don't buy any software, pen and paper works fine. I track on my computer. I don't like tips, but HD has been good for me, range is $33 to $60 and I get splits all the time (own more stock) CAT a little pricey right now, good buy at around $45 if you ever see it that low.

DO NOT GET IN A HURRY, some broker will burn you ! I have a friend, former E. F. Hutton & Olde Broker, UNC graduate, 58 years old, told me EVERY CLIENT HE EVER HAD LOST MONEY !

I PICK MY OWN STOCKS AND I DO OK !

Answer 3

A Mutual Fund (MF) generally has a minimum investment amount, generally $2,000, but this varies.

The definition for a Mutual Fund (MF) from Wikipedia:
A mutual fund is a form of collective investment that pools money from many investors and invests the money in stocks, bonds, short-term money market instruments, and/or other securities. In a mutual fund, the fund manager trades the fund's underlying securities, realizing capital gains or loss, and collects the dividend or interest income. The investment proceeds are then passed along to the individual investors.

Let’s look at Investment Company of America (ICA), owned and operated by American Funds (AF). AF is an awesome fund company for a couple of reasons. There are several advantages and disadvantages:

1.AF is a private company which means they only answer to their MF holders. Fidelity is a good company also, but they are owned by stock holders. In the long run the company that only answers to you, the MF holder, is going to look out for your best interests.

2.AF also has some of the lowest annual fees to maintain an account of any MF company. All that being said, depending on your situation ICA may or may not be good for you. You need a competent advisor to help you with that.

3.I would be cautious with ICA as it is one of the largest MF in the world. They may seem like a good thing but it actually can be bad. It means it has much less flexibility to move its money around when conditions warrant it.

4.As far as EJ goes, they hire people on average who have very little experience in the industry, so at a minimum make sure your rep has a lot of experience and didn't just start last month at this. They also have agreements with companies like American Funds where their reps get a bigger commission to them then they do with other products. The concern being your advice from EJ might be tainted by the reps desire to get more commission. You need to work with an independent rep to assist you with you decisions; one who will give you all the information and doesn't have a hidden agenda.

Now let's look at MF's, in general, or the decision to use one at all.

If you invest in a MF, you have turned that responsibility over to someone else. To me, they are mostly the same, in general, in terms of results. Fewer than 10% can beat the Dow or other index it follows because of their fees. Why would you pay someone you don't know, whom will almost certainly underperform the market, an annual fee of 2.5% to do something you can do yourself, and do it better by buying an ETF, without any input from you after the initial purchase? An ETF is a publicly traded “Exchange Traded Fund, that trades just like a stock). Just buy the Diamonds (the DJIA ETF) if you want to let it ride on the Dow, or the Spyders (SPY - the S&P 500 ETF), or the Nasdaq (QQQQ), or diversify across the entire market by buying all three. The ETF's trade just like a stock or MF. If you want to diversify, and you want to Buy and Hold, buy an ETF.

A MF is always "in" the market, so you are at the mercy of the ups and downs of the Dow. Since you don't manage your risk, you can't put a Protective Stop on a MF, at say 10%, to lock in your profits when the market goes down. Since you spend more time watching TV, or more time deciding the color of your new car, than you do on learning how to manage money, you don't have a clue what's going to happen. That is not my idea of investing.

Actually, if done properly, it is more work to investigate all of the MF's and their advisors and their traders and their fees and their methods, than it is to investigate all the similar applicable info about stocks. You shouldn't choose to be ignorant, regardless of your investment vehicle, and just blindly turn your money over to a stranger because they are "listed," like you do at a bank. Some MF's are downright reckless and go out of business. Stocks are "listed," as are commodities and ETF's and everything else. With a mutual fund, you've just added a whole new set of unknowns to the equation, simply because you don't want to know anything about it.

The market is a living thing that does what it wants, and will go where it wants, when it wants. Nobody knows these things. Your question seems to interject that somebody has "The Answer." The best you can do in any investment is try to increase your odds of success and reduce your risk. You can do these things yourself, but not in a mutual fund.

MF's are so 20th Century. Relics of the past. Unneccessary. Buy an ETF. Or sell an ETF short and bet on the downside. There are two sides to every market, not just the upside.

Answer 4

I don't like American budget. They are group controlled and plenty of are loaded budget. I like to place my cash with a supervisor who I realize what sort of supervisor I am attending to care for my cash. You are one hundred % proper on banks. They are unhealthy locations to take a position. The URL beneath is a functional street map to making an investment. Remember you could have plenty of offerings. I like no load mutual budget. Why pay a fee whilst you'll get anything bigger at no cost?

Answer 5

mutual fund investment require you to invest at least usd 2million,then they will give all detail where you money go..all information will be transparent...but if you just a small investor like me....they dont have time to answer such question...
they will provide you sufficient information..but not all transparent..
becoz they will work to give your money+profit..not to answer your question IoI................