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Mutual Funds >> Mutual Funds Basics

A Mutual Fund is an investment vehicle that pools the financial resources of a number of individual investors. Being a collection of many stocks and bonds,there are many variations of mutual funds. some of the benefits of buying mutual funds are diversification - Minimise Risk, Liquidity - Fast cash, Affordability - Low minimum investment, Expertise and experience - the trustee manager provides investment expertise and professional management.

As in any investments, there are many hybrids of mutual funds. Understanding the general objectives of these different mutual funds are important as different types of mutual funds carry different returns and risks.

Basically, mutual funds can be broadly categoried into these four groups :

GROWTH FUNDS. Designed to maximise the value of your investment over the time, growth mutual funds invest primarily in stocks that have a strong potential for above-average growth and are considered risky investments.

GROWTH and INCOME. Designed to provide both regular income and long-term growth in the value of your investment, growth and income mutual funds invest primarily in stocks and bonds or a combination of both.

INCOME. Designed to provide a regular stream of income, income mutual funds invest primarily in interest-paying bond stocks that pay regular dividends or a combination of both.

CAPITAL PRESERVATION. Designed to maintain a stable price share while providing current income, capital preservation mutual funds include money market funds.

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