Many people want to take advantage of the opportunity to invest as a way to supplement their income, but few people have the knowledge or the time to monitor stocks and they are reluctant to pay the high fees associated with full-service brokers.
As well, most people know that a diversified portfolio is the best-performing portfolio, but few people have the huge capital it takes to properly diversify a portfolio made up only of stocks.
One option for those people is to purchase mutual funds.
A mutual fund is a pool of money from a number of investors and it is given to a mutual fund manager to go out and buy a good selection of diversified, well-performing investments.
There are many different types of mutual funds, so there is something out there for everyone. If you like bonds, for example, you can buy a mutual fund made up just of bonds and its return is probably better than most bonds available on the market today because they use a laddering concept to buy and sell bonds strategically. The income from this fund comes from the interest paid on the bonds. These are called fixed income mutual funds.
If you like stocks, there are many mutual funds available for you to consider, from riskier ones to safer ones to funds that trade primarily in overseas marketplaces. You will likely find a mutual fund that matches your risk tolerance, gives you a good return, and provides you with some diversification. The income from this fund comes from buying it the stocks low and selling them high. These are growth mutual funds.
Some of the consistently best-performing mutual funds are funds that are a combination of fixed income and growth. These are called growth and income mutual funds and they combine bonds, dividend paying stocks, and growth stocks altogether in a diversified fund. The income from this fund comes from a combination of bond interest, dividend payments, and growth-style selling. It is an excellent choice for putting in your portfolio. If you can only afford one mutual fund, this is probably the fund to purchase.
Whether you are trying to avoid the fees of a full-service broker, or are trying to invest wisely with a brief amount of time you have in the week, or are simply trying to diversify your portfolio, a mutual fund is an excellent choice. And a growth and income mutual fund, is usually the best choice.
What’s more, mutual funds are professionally managed, which means you don’t have to spend your day watching stock prices go up and down. The mutual fund manager does that for you. He or she watches the individual stock prices, makes adjustments, and sends you a report on a regular basis.