Investing Can Be Funds

Investor demand for mutual funds rose considerably in 2007. Net mutual fund inflows of $883 billion shattered the previous record ($504 billion) set in 2001.

The popularity of mutual funds is not surprising, considering the benefits they can offer to investors. Some of these benefits could help make mutual funds an important part of your portfolio.

Professional Management
Mutual funds are run by professional money managers who pool money from shareholders and invest it in pursuit of the fund’s stated objectives. They do the heavy lifting for investors by studying company financials and continuously watching the markets.

Diversification
Mutual funds can own hundreds of securities at one time, allowing shareholders to maintain a level of diversification that might be expensive to achieve by investing in individual securities. Diversification is a method used to help manage investment risk; it does not guarantee against loss.

Flexibility
Given the thousands of mutual funds available, it is likely that you will be able to find a mutual fund or a combination of funds that matches your financial goals, time horizon, and risk tolerance.

Liquidity
It’s usually possible to liquidate mutual fund shares quickly in the event of an emergency or unexpected expenses.

The return and principal value of mutual funds fluctuate with changes in market conditions. Shares, when sold, may be worth more or less than their original cost.

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