Mutual Funds
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The benefits of mutual funds

A mutual fund pools money from many investors who share the same investment objective as the fund. Mutual funds give everyday investors a variety of investment opportunities. For people who don’t have the knowledge, time or money to create a portfolio of individual securities, mutual funds offer important benefits.


Professional management

Investors benefit from the knowledge and experience of professional investment managers who are dedicated to security analysis, evaluation and selection.


Liquidity

Investors have immediate access to their money by selling shares at the fund’s net asset value, which is determined at the end of each trading day. The fund's net asset value will fluctuate each day so that an investor's shares, when redeemed, may be worth more or less than their original cost.


Diversification

Not "putting all your eggs in one basket" is an important way to limit risk. Because mutual funds generally invest in a wide range of securities, like stocks and bonds, they provide immediate diversification. And because mutual funds are sold in shares, no matter how much you invest, you own a proportionate amount of all the fund‘s holdings.


Simplicity

Custody, tax reporting and record-keeping are among the many services mutual fund companies provide in a highly cost-effective manner. Many also provide investors with a wide array of shareholder services, including quarterly reports, duplicate statements, fund performance updates and extended hours during tax season.


Study the route

There are over 10,000 mutual funds available to investors! If you’re new to investing, you might feel overwhelmed. But don’t worry—most mutual funds can be classified into three broad categories according to the type of financial assets they hold. These categories offer different levels of investment risk. A good guideline: the higher the risk, the higher the potential return, and the lower the risk, the lower the potential return.


Money Market Fund

A mutual fund whose portfolio is made up of short-term (usually 90 days or less), low risk securities, such as commercial paper (i.e., short-term corporate IOUs) or certificates of deposit. Because they are low risk, they tend to offer lower returns.


Bond Fund

A mutual fund whose portfolio is made up of mostly fixed-income securities (i.e., bonds). While there are various types of bond funds, most offer low to moderate levels of both risk and return.


Stock Fund

A mutual fund whose portfolio is made up of mostly stocks. In exchange for higher risk, the fund’s objective is usually geared towards earning higher returns. Because stock and bond funds are more sophisticated and harder to understand, this guide will focus on explaining these types of funds.


 

Past performance does not guarantee future results. © Ariel Investments, LLC. The mutual funds offered by Ariel Investment Trust are distributed by Ariel Distributors, LLC. Use of this website is subject to our Terms & Conditions of use. Each of the investment products, mutual funds or services referred to in this site may be offered only to persons in the United States. This web site should not be considered a solicitation or offering of any investment products, funds or services to investors outside the United States. Original illustrations © Omar Rayyan 2007.