Are mutual funds guaranteed?

Question

Am I better off with a guaranteed 5% CD? or is 12% also guaranteed (just requires more initial investment and input).

Answer 1

Nothing is guaranteed in life...
but its still lots better then putting your money in a CD with 5%.
It all depend on what level of risk is that mutual funds has.
Some mutual funds has low risk and some has high risk.

High risk = high return, low risk = low return.

For myself, I have like yourself, put money in a CD for 5% for 5 years, actually, this week it matures and its only earned me of $294 for $1k, and during that same time I have put in $1250 in a mutual fund for a little over 4 years, and the earning I have got from it was $1k. But in my case, i know the risk in the mutual fund, and I done my research. In my case it work out for me.

So Good luck in finding a mutual fund that served your purpose. =D

Answer 2

CDs or mutual funds - which is better? Depends on your time horizon and if you can sleep soundly at night with non guaranteed investments. Muncie wrote a good answer, I would like to add 2 things. Besides the lower after tax return he mentioned with CD's, lower the "real" return even more after accounting for inflation. Holding CD's long term means the odds are you will lose the purchasing power of the money. CD's are for short term, 5 years or less. Investing in funds/stocks are better (in my opinion even though they are not "guaranteed") option. In the long run, they are the easiest way to beat taxes and inflation. Since the great depression, I think there has not been any 30 year+ period where you would have lost money investing in good quality, large cap stocks, not graranteed, but the odds are certainly in your favor.

Answer 3

there are no guarantees with mutual funds. In fact from 2000 to 2003 many mutual funds lost 50% of their value. Some even more.

Historically, over a long period of time mutual funds have returned on average about 10%+ and some have even done the 12% you have mentioned. So if you can live with an occassional drop of 25% or so, they are an excellent way to invest. There are however other drawbacks to mutual funds and to cds that you should carefully consider. That is the tax consequences of each. The return from your cd will be taxed at the full tax rate, reducing your after tax return to many 3% to 3.5%. Mutual funds also suffer from a tax penalty. They must pay out all realized capital gains which can be significant and you are taxed on them. Some of those gains will be at a favorable tax rate of about 1/2 the normal tax rate.

There is a new class of mutual funds called index funds which have very little realized captial gains. They have become very popular.

So to sum up your choice is between a 3 1/2% return after taxes guaranteed and an expected long term return of about 9% after taxes but not guaranteed and quite possibly a signficant loss.

Answer 4

There is no such thing as guaranteed. All the things that we do in this world is all about risk. To make it as in general, mutual funds is all about diversify your investment to reduce your risk instead of you invest directly in stock market. To learn about more mutual funds or unit trust, you can check out the link below.

Answer 5

Mutual funds are not guaranteed, but selecting a fund or funds properly allocated for your objectives and risk tolerance is one way of decreasing your risk.

CDs are, in most cases, a poor option if you're saving for the long term. Between inflation and taxes, you net little or nothing. Tax-free municipal securities and annuities are safe options offering significant tax savings and better return.

Answer 6

1) No.
2) No.

Answer 7

Not guaranteed or insured in any way.