what are the difference of a mutual funds, government funds, index funds and which one of them is the best to?

Question

pick for my $5000 savings???

Answer 1

I suggest ETFs.

Answer 2

A mutual fud is a pooled investment vehicle that invests in other securities.

A government fund isa mutual fund that invests principally (at least 80%) in government bonds.

An index fund is a mutual fund that does its best to carry the same securities and in the same proportion as the securities in an index.

Which to invest in depends on your risk tolerance, if you cannot tolerate losses in the short or medium term, stick with government funds, if you want to invest in index funds, you may incur some losses, but in the long term you would likely make more.


An ETF, is a variation on an index fund that is an exact replica of an index. ait might be a little cheaper than an index fund and youhave more control over your tax liability (note, it is not cheaper than a Fidelity or Vanguard index fund)

Answer 3

You can get a pretty decent explanation of " funds" at
http://moneycentral.msn.com/beginnerguide/asp?page=introduction
As far as the "investment advice" for your $ 5000. that really depends on your age, how much more you can add along the way, if you'll need some cash now and again,soon?
If you have NO retirement fund( no pension plan at work, no 401k,etc) ....Get $3000. of those dollars into an IRA ..NOW... you cannot neglect your long term needs( because Soc.Security amounts to "diddle")
If you take care of that IRA with E=trade, Fidelity,or somebody...then ,work with them to use that other money to look at some world market mutual funds. ..they're growing and you gotta, too.
The MSN stuff is easy reading...the investing is " one- step- at- a- time" BUT you've got to do it.....like your life depends on it...(because it might)
Once you take the first steps, you'll be amazed how easy it is to do......best of luck !!

Answer 4

If that $5,000 is your life savings then don't go with any of them. Keep the money liquid because if the need arises for you to tap into that fund for an emergency you could end up having to cash out during a low period and actually lose money. You should consider investing in stocks, bonds, funds or whatever for long term growth and not as a savings vehicle. If that $5,000 is "extra" savings that you want to invest the answer is on your risk factor and how long you intend to leave it in the fund(s). An author that I think gives good insight on money is Suze Orman. Her books are at your local library. If you have any credit card debt, pay that off completely although you still should consider having liquid savings for emergencies of at least six months income as a "cushion" in the event of job loss. $5,000 is not a whole lot of money to invest if you are paying more interest than you would earn. Put that $5,000 on any existing debt or into a safe 6 or 12 month CD. If you want to start a fund account, start out with $50 and contribute to it weekly, monthly or whatever for long term growth but don't invest every dime you have especially when you don't understand the differences between the type of funds you are looking into. If you don't have a retirement plan, start with that NOW. If you do have one and it's not maxxed out then increase your amount of contribution while continuing to add to that $5,000 savings to make it $10,000 and $20,000 and whatever equals six months of expenses just in case. The keys to wealth are to live below your means and invest in your future. There's no point in getting 8% interest in a fund and paying 20% interest on a credit card. Another good investment option is to create a will and/or trust to protect your loved ones. Consider pre-paying term life, disability, gap, or long-term care insurance. You'll have more negotiating power with cash for any emergency needs than with credit.