Mutual funds

A mutual fund is an investment company that pools the money of many investors and invests it on their behalf. Based on a fund s stated objective, the money is invested in stocks, bonds, money market securities, or a combination of these. At the end of 2004, there were about 8,000 mutual funds with 267 million accounts worth in excess of 8.1 trillion. All investments have an element of risk. Mutual funds are no different. And, with so many choices, great care should be exercised to find a fund that is right for you. 

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Before closing the deal your alternatives should also be considered. Some mutual funds have at times earned 12% annually. These are based on a portfolio of stocks and there is no guarantee that there will not be a loss instead of a profit. If 13,500 is invested at 12% per annum, after 7 years the value of the principal plus interest is 29,800. To request this amount from your roommate in return for financing his car would still be reasonable. Other alternatives would be municipal or government... 

Credit Business Management Stocks Mutual Fund... 

The Problem The local Kiwanis Club needs 20,000 in interest annually in order to adequately fund its benevolence programs. It currently has 120,000 invested — one-third of it in a mutual fund earning 5 percent interest and the rest in a money-market fund earning 10 percent interest. This division of the funds is mandated by its endowment agreement. How much more money does the Kiwanis Club need, and how much does it have to have in each fund in order to earn that 20,000 annual interest ... 

Invested Assets. These are certificates of deposit of more than one year, stocks, bonds, mutual funds, business interests, partnership interests, mortgages, real estate, annuities, and retirement plans. 

To compute your net worth, gather all your financial records such as checkbooks, statements from banks, mutual funds, credit unions, and brokerage houses, and your loan balances. Check the value of your residence, automobiles, tools, and equipment by reading the classified section of your daily newspaper. You are now ready to compute your net worth using the following worksheet. 

Money Market Accounts Certificates of Deposit U.S. Government Securities Stocks and stock mutual funds Bonds and bond mutual funds Partnership interests Business interests Deferred compensation Real estate investments Net equity from sale of residence Net equity from sale of vacation home Other retirement savings... 

You could put your savings in stocks or a stock mutual fund. These choices have provided substantial growth of both income and capital over long periods of time. But, with wide, unpredictable price swings you would be exposed to market risk if you needed to draw from savings in excess of current dividends. 

Mutual funds appeal to such a large number of investors for many valid reasons. Here are the ones most often cited. 

Professional Management Few investors have the time or knowledge to analyze companies and securities, study forces that influence the economy, and assess trends in financial markets. With mutual funds, individual investors gain access to professional portfolio management at bargain rates. 

Liquidity Mutual fund shares can be sold at any time at their current market value. They are subject to market risk. 

Convenience You can add to your mutual fund holdings at any time. Additionally, record-keeping is simplified by the periodic reports and tax information provided. Withdrawals are also convenient. Many funds will mail you a monthly check while others offer check-writing privileges. 

Regulation Mutual funds are regulated by a number of federal and state laws. They are also subject to the regulations of the Securities and Exchange Commission. This has led to a high level of confidence among mutual fund investors that they will be treated according to the published materials issued by the funds. 

An easy way to invest in stock mutual funds is to buy an indexed fund. These funds invest in all the stocks of the group they are attempting to duplicate, such as the Standard Poor s 500. As a result, administration fees are minimal. 

Mutual funds offer excellent investment opportunities for the average investor. 

Web site of Investment Company Fact Book provided by the Investment Company Institute. Everything you want to know about mutual funds generally—not specific funds. 

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