Mutual Funds

Why Should You Choose Mutual Funds?

Mutual Funds are probably the most widely used form of investment vehicle currently on the market. Mutual Funds were created so that people who do not have the capital needed to invest in stocks can simply buy mutual funds. Mutual funds are made up of shares in many different companies so that the investor's risk is minimized. What happens with a mutual fund is that the money invested by each person who buys that fund is combined in a big pot. The money from this combined pot is used by the fund managers to buy shares in many different companies. When one company is no longer doing well, the fund managers will sell the fund's shares in that company and purchase stock in another company. Good fund managers can provide the funds with returns as high as ten or fifteen percent a year.

When mutual funds first hit the investment market there were only a few of them. Today there are over ten thousand investment products and vehicles – many of them managed funds. In fact, many financial institutions have now jumped on the financial products bandwagon and are offering customers their own mutual funds that are put together by their own fund managers. The sheer volume of mutual funds now on the market can make choosing the right investment vehicle difficult even for seasoned investors.

One way of knowing whether or not you are making the right decision is to research the return history of the fund in which you are interested. By tracking the fund's history you will have an overall snapshot of what kind of performance you can expect from that mutual fund. Another way of determining which mutual funds are right for you is by consulting with an investment professional. Investment advisors will sit down with you and assess your risk profile and suggest which mutual funds best suit your personality and investment goals.

Despite their low risk potential, it is still possible for a mutual fund to lose market share and price. So, no matter what investment you decide to make you must always remember that there is a small risk to your investment – but managing that risk is something that a good investor will know how to do.