Investing in Mutual Funds

Topics: Investment, Mutual fund, Bond Pages: 2 (532 words) Published: February 9, 2013
How to invest in Mutual Funds
Step 1: Choose the type of Mutual fund you want to invest in.
There are many different types of mutual funds but all you need to know to begin is the three basic types: stock funds, bond funds and money market funds. There are also hybrids, usually called balanced funds, which invest in some combination of the three basic types. Step 2: Determine how much money you want to invest, for how long and in what kinds of investments.

It is also important to know your risk appetite. Risk appetite refers to how much risk are you willing to take for every investment. Investors are classified as risk takers, risk averse and risk indifferent. Step 3: Find or contact a company

Before buying a fund, you should look closely as to how risky these investments are and if you can tolerate it. You should also look into the costs including the taxes and the returns of these investments because these costs and taxes can eat up your investment returns. Step 4: Look into funds that rank highly over a period.

You should consider that your investment should create good long-term results. A balanced fund is at 50/50 ratio (equity-debt). Its goal is to provide a total return that consists of a high level of current income with a consistent preservation of capital, liquidity and long-term capital appreciation. Terms:

Mutual fund is a pool of funds/money from different investors to create a variety of investment securities. Stock funds are appropriate for long-term goals, usually more than 10 years. Bond funds are appropriate for medium-term investments (5-10 years). With this type of mutual fund, you may consider government bond funds for safe investments. For high risk investments, high-yield bond funds can be ventured into. Money market funds are appropriate for short-term investments (less than 3 years). There are other types of mutual funds as well- open-end mutual fund, active funds and passive funds as such. Open-end mutual fund means that...
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