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Investing For Dummies®, 5th Edition by Eric Tyson, MBA

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Chapter 8. Mastering Mutual Funds

In This Chapter

  • Looking at reasons to invest in mutual funds

  • Uncovering the secrets of successful fund investing

  • Deciding how to allocate your assets

  • Finding the best stock, bond, hybrid, and money market funds

A mutual fund is simply a big pool of money from lots of typical investors that a mutual fund manager uses to buy a bunch of stocks, bonds, and/or other assets that meet the fund's investment criteria. The better funds enable you to easily and cost-effectively diversify your investments — that is, invest in many different industries and companies. (In the earlier chapters of this part of the book, I explain all about stocks, bonds, and other common securities. If you understand these securities, you can understand mutual funds.)

When you invest in a fund, you buy shares and become a shareholder of the fund. Good mutual funds enable you to have some of the best money managers in the country direct the investment of your money. Because efficient funds take most of the hassle and cost out of figuring out which companies to invest in, they're among the finest investment vehicles available today. Different types of mutual funds can help you meet various financial goals — that's one reason why investors have more than $12 trillion invested in funds! You can use money market funds for something most everybody needs — an emergency savings stash of three to six months' living expenses. Or perhaps you're thinking about saving for a home purchase, retirement, ...

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