Thursday, December 20, 2007

Mutual Funds

Mutual Funds

Compare Mutual Funds-Tips For Finding The TopOnes To Reach Your Financial Goals

Many people want to know how to compare mutual funds to makethe right decision. There are obviously many factors at workhere. First of all, you need to determine if investing in thisvehicle is right or you. Generally speaking, a mutual fund is for people who aren't veryfinancially educated, and really don't have any time to becomeso. They are generally for people who want to give their moneyto a fund manager and have them do the work for them. If you aren't financially educated enough to read the financialstatements of a company and determine it's overall financialhealth, then finding a best performing mutual fund is probablyright for you. It is very risky to invest in a stock just basedon whether it's stock price is going up or down.

These investments are divided into two groups based on thechoice of how they are acquired. These groups are load and noload funds. No-load funds: The advantage of no-load funds isthat 100% of your funds are fully invested from the beginning ofthe investment. Loaded funds: The advantage of loaded funds is the addition ofprofessional advice in which category to select for your goals.Important factors in considering if you should invest in amutual fund should be: • Operating cost of the fund • The goal of the fund and if it matches your investment goal Stock mutual funds are considered the most risky of all mutual funds. However, these funds are more likely to generate a higherreturn than the other types of mutual funds, especially overtime.

Bond mutual funds deal with securities. Essentially, when youinvest in bond mutual funds you are investing in the debtobligation of governments and corporations. Corporate bondinvesting are more risky than money market investments, and areoften used to generate retirement income. Since this type of investment is typically very diversified,they tend to reflect the trends of the market as a whole. Whenthe market is doing well, generally the fund will do well, andwhen the market is going down, the fund will usually followsuit. Of course, in times of a market crash, a mutual fund canliterally wipe out your entire portfolio if you aren't careful.Therefore, don't ever buy into the myth that a fund isn't risky.It can be very dangerous, especially in times of a market crash.While these occurrences are rare, they can occur, and youcertainly need to be wary of them.

The bottom line: it is always best to know what you areinvesting in before doing so. Your finances are one of the mostimportant areas of your life. If you aren't financiallyeducated, you can never achieve financial freedom. It is never good to entrust your financial future to someonewho really has no interest in it. When it comes to yourfinances, you need to take charge yourself. You can get by withoutsourcing other areas of your life, but when it comes to yourfinances, you need to be the boss. Remember this: you can always make more money making your owninvestment decisions than you can with a mutual fund. Yes,sometimes in a bull market it pays off, but is the risk reallyworth it?

Therefore, if you are set on investing in these vehicles,always compare mutual funds with their counterparts, and makesure it has a long history of profitability to find the bestmutual funds. The top mutual funds are always those that haveexhibited a long time of profitability so that you can bereasonably sure this trend will continue. While this step won'teliminate risk, it certainly can reduce it.About The Author: To learn to compare mutual funds, visit Get a mutual fund tutorial toincrease your understanding of these investments.

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