Are Mutual Funds the Best Choice for You?
From Wall Street whiz kids to your neighbor's nephew, we live in a time when
it seems everyone has a can't-miss invetment tip.
Unfortunately, it's not uncommon for today's tip in tech stocks to become
tomorrow's financial tragedy.
One way to avoid the problems that can come with chasing the next "sure
thing" is to use the same approach to investing that large institutions,
such as universities or hospitals do - mutual funds.
Investing through a mutual fund can offer an individual investor a number
of significant benefits.
- Professional asset management. Few people have the time, training or temperament
to manage their own investments. A mutual fund can offer the guidance of
a full-time professional who is responsible for monitoring the fund and
deciding when to buy, sell or switch securities in a way that maintains
the fund's investment objectives.
- Divesification. Investing all of your money in one or two stocks can be
risky. investing in a mutual fund can reduce this kind of risk by investing
in a variety of companies or industries. Some funds place a self-imposed
limit of five percent on the percentage of the fund's assets that c an be
invested in any one security.
- Liquidity. One of the more significant benefits offered by mutual funds
is liquidity - the ability to quickly convert your investment to cash.
This is much different from fixed income products, such as CDs, which can
tie up an investor's funds for several years.
- Tax reporting. A fund will track and inform you of your income and capital
gains tax obligations.
- A choice of objective. Whatever your temperament and financial goals,
there is probably a mutual fund for you. Whether you are looking for a stable
fund that will provide a steady stream of income or an international equity
fund that offers higher risks and the potential for higher returns, there
is a fund that will meet your needs.
- Retirement friendly. Since both IRAs and mutual funds focus on long term
objextives, many investors deposit one or more funds in their IRA or 401(k)
account. As of 2000, mutual funds accounted for 46% of the $2.7 trillion
IRA market.
Professional management, liquidity, diversification and the opportunity for
returns in excess of ten percent. With benefits such as these, who needs the
next "sure thing?"
The financial experts at Primerica have created a guide that shows you how
to take control of your financial life. To get a copy of How Money Works:
Secrets to Financial Success, write to Primerica, 3120 Breckenridge Blvd.,
Duluth, GA 30009 or call 770-564-6329
