What should I consider when choosing a mutual fund?
To ensure you are selecting the funds that are appropriate for your needs, consider the following:
- Figure out, after taxes and expenses, how much money you actually have to invest.
- Determine what your financial goals are. Are you investing for retirement? A child's education? Or for current income? If so, do you need tax-exempt income?
- Consider your time frame. Do you need the money in a few months or in ten years? The longer your time horizon, the more risk you may be able to take.
- How do you feel about risk? Are you willing to tolerate the ups and downs of the financial markets for the possibility of greater rewards?
All this information will have a direct impact on the funds you choose.
What are the benefits of professional management?
Few investors have the time, the expertise or the technology to follow the financial markets, not to mention individual securities. When you invest in a mutual fund, the fund is managed by a professional with the skills, background and resources necessary to make investment decisions.
What is a prospectus?
A prospectus describes the Fund's investment objectives, policies, identifies who manages the Fund and explains its management fees and other charges and expenses. It also provides essential information such as instructions on how to purchase, redeem or exchange shares. Less essential information, such as a Fund's brokerage policies, are available in its Statement of Additional Information.
When is the right time to invest?
Depending on your needs, just about anytime can be the right time. Markets go up and markets go down, so it makes little sense to try to "time" them. What makes sense is starting a plan of regular investing to take advantage of an approach called "dollar cost averaging."
Are mutual funds guaranteed?
No. Mutual funds may offer the potential for great rewards, but they are not bank deposits and are not FDIC-insured. They involve investment risks that you should clearly understand.