THE ULTIMATE
Considering mutual funds for an investment? Be sure you understand the most important facts regarding mutual funds before taking the big step. First, it is important to understand what a mutual fund is and what it is not. Basically, it is a collection of bonds and/or stocks. They are known as financial intermediaries because they are designed to receive your funds and then make the investments with those funds. Usually they are what are known as actively managed. This means that the through an annual fee mutual fund shareholders pay a fund manager to actually actively buy and sell the bonds or stocks within the fund. You become a shareholder or owner when you purchase shares of a mutual fund. At that time you receive voting rights that are in proportion with your ownership in that particular fund. In order to choose the funds that will perform best for you it is imperative that you give careful consideration to the funds you choose. Toward that end, you should understand as much as possible regarding the difference between the various types of mutual funds. A bond mutual bond consists of amounts of money that are pooled together. They are basically IOUs which have been issued by either governments or companies. When someone purchases a bond they are lending money to the issuer and a regular interest payment will be made until the money is returned. The interest rate is generally fixed at a set rate for the amount of money that is invested. This means that bond funds are fixed income investments. Balanced funds provide a mix of both bonds and stocks. Most commonly, a balanced fund might consist of a mix of between 50 and 65% stocks with the remainder lying in bonds and cash. You should always make sure you fully understand the specific mix of stocks to bonds in order to assess whether the level of risk and reward is appropriate for your situation regarding that fund. Another type of mutual fund is known as a global and international fund. This type of fund invests in companies overseas. Generally, you can anticipate that this type of fund will be more volatile than many other types of funds. Sector funds are very specific regarding the sector of the economy in which they invest. This could be banking, computers or pretty much anything. This type of fund can also be very volatile. Index funds allow you to have full participation in a segment of the stock market. It matches the shareholdings of a target index and do not involve stock picking. Finally, there are what are known as general equity funds. These stocks represent a part ownership in corporations. Generally, a mutual fund will invest mainly in a particular size of stock fund, which is categorised by their market cap. The three basic sizes are small, medium and large. Stocks are also typically classified by their type, such as either value or growth. You may also see a combination of the two, which is known as a blend.
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A foreign exchange managed account is a fantastic way to get into the FX market without the need to find out all about it. Archives
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