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Inner Workings of Mutual Funds

27 March 2006 - Markets - Editor

For the wary investor, the mutual fund can be the perfect place to begin investing. Instead of having to pick between thousands of stocks and evaluate which will serve you best, you can choose a mutual fund to quickly and easily diversify your holdings.

Mutual funds are run by investment companies with expert mutual fund directors who select the best stocks for each type of fund. These men and women are authorities in their field and have reached this point in their careers due to their expertise.

Additionally, all mutual fund purchases are backed up by hard data. Statistics of the stocks and bonds past as well as projections for future growth are used to make sure that your money is spent appropriately and that the fund is mostly protected from the general fluctuation of the market, steadily gaining interest over time.

The Upside: Mutual funds are already diversified so they are often less affected by the market than individual stocks.

The Downside: Mutual funds may have higher maintenance fees since they are run by financial experts. If you are investing small amounts of money, you may want to consider municipal bonds at first so that you lower your taxes and avoid extra fees.

 


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