Mutual Funds have been around for a long time. This name came about because the stock holders and the investment companies managing the stocks share a mutual interest in the success of the investment. When you win, the company also wins, which gives the investment company a lot of incentive to work hard and give you the best portfolio possible for your money.
Mutual funds are priced according to the price of the stocks they are made of. They should not cost any more than the stocks they are made out of, however, some companies will charge management fees for the company to continue to tend and care for your stock portfolio. These management fees are very normal and should not be considered a scam. After all, the people managing your stocks will need to pay their rent, too! When the mutual fund is sold, the owner of the mutual fund will be paid whatever the stocks inside had sold for.
When you are looking for a company that specializes in mutual fund holdings, with regards to the fees, you are recommended to compare the fees that are required. There are variations in the fees and in the level of services that are provided. You should only deal with a company if you are comfortable working with them and with the fees that they require.
There are three main kinds of mutual fund companies: common stock funds, balanced stock funds, and specialty funds.
Common stock companies will buy and manage many diversified stocks in portfolios. They then take the stocks and carefully trade, buy, and sell them to keep the investment growing. No bonds, cash, or preferred stocks are figured into the equation. These are made to grow more quickly, though they can lose quickly as well. These are suitable for a short term investment but they have to be chosen and watched very carefully because of their ability to lose money quickly.
Balanced funds use a mix of carefully selected stocks and bonds in their portfolios. These mutual funds are all about stability which will lead to slower growth, but the growth should remain steady even if there is an economic downturn. These are more suitable for long term investments.
Specialty funds specialize in one particular area of stocks or bonds of the buyer’s choice. For example, a specialty fund could choose to invest within a single industry (such as the medical industry), focus on preferred kinds of stock only (such as low-priced common stock), or invest primarily within a geographic region (for example, companies based in England).
Regardless of the kind of mutual fund chosen, all mutual funds are regarded as some of the safest investments out there. As the portfolios are so diverse, an attentive manager can quickly negate any downturns in one particular stock knowing that the others will help keep the investment growing. Great stability and steady returns make mutual funds a great choice for long term investors of almost any skill level. They are highly recommended to be a part of most investment portfolios.