Why Mutual Funds?

Mutual funds are a simple, convenient way to invest in stocks, bonds, money markets, commodities and other securities. Through mutual funds, almost anyone can invest in the financial markets as a means to meet financial goals. Nearly half of all U.S. households invest in mutual funds.

These professionally managed investment products use money from investors to create a diversified pool of securities to achieve a specific investment objective. Investors purchase shares, which represent ownership in the mutual fund. The price of the fund fluctuates based on the gain or loss of the securities that make up the fund. Investors in a mutual fund are entitled to a pro-rata share of the proceeds, or the losses.

The Benefits of Mutual Fund Investing

Professional money management

Mutual funds provide the benefit of full-time investment management expertise and recordkeeping services. Fund investors own shares in a diversified, professionally managed portfolio that most investors could not afford to create.

Diversification

A mutual fund is required to be diversified. Its assets are invested in many different securities. This reduces the exposure to individual security risk by spreading risk across many different securities. In addition to the diversification inside a mutual fund, mutual fund investors manage risk by purchasing mutual funds with different objectives. A balanced portfolio of different asset classes (stocks, bonds, real estate and commodities) and categories within an asset classes (value vs. growth stocks, or government vs. corporate bonds) is a risk management strategy.

Affordability

Minimum investment requirements and subsequent investment minimums are low enough on some mutual funds that most anyone can invest. Plus, you have access to types of investments not always available for small investment amounts.

Convenience and Accessibility

Mutual funds may be purchased directly from a fund company, through a financial advisor, through an employer-sponsored retirement plan or from a fund supermarket. Each share purchased represents a widely diversified portfolio of investments, professionally managed for you.

Liquidity

Mutual fund shares may be redeemed at the closing price any day the financial markets are open. Some funds, especially international funds, charge redemption fees to discourage short-term trading. You may have your proceeds sent by wire, electronic transfer or check.