The goal of a marathon run is fairly simple – to reach the finish line 26.2 miles away. Your race to financial security can begin as soon as you determine your goals.
Once you know where you’re headed, it’s easier to chart your course. Novice investors, like amateur runners, are wise to use caution to avoid harming themselves.
Just like you would use a trainer to help you run a marathon, many new investors choose mutual funds because they offer the convenience and skills of professional management.
But even though someone else is making many of the investment decisions, it’s important to learn the basics, remain disciplined and exercise patience.
Why invest in 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.
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.
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.
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.
Investors benefit from the knowledge and experience of professional investment managers who are dedicated to security analysis, evaluation and selection.
How to start investing
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