Chapter 10. Investing in Funds

In This Chapter

  • Grasping the advantages of mutual funds

  • Checking out the different types of funds

  • Choosing the best funds

  • Evaluating your fund's performance

  • Monitoring and selling your funds

When you invest in a mutual fund, an investment company pools your money with the money of many other like-minded individuals and invests it in stocks, bonds, and other securities. Think of it as a big investment club without the meetings! When you invest through a typical mutual fund, several hundred million to billions of dollars are typically invested along with your money.

If you're thinking of joining the club, read on to discover the benefits of investing in mutual funds and exchange-traded funds and the types of funds available (see Chapter 9 for a discussion of mutual fund alternatives). In this chapter, I advise you on analyzing and choosing your funds, explain how to track your investments, and help you decide when to sell.

Understanding the Benefits of Mutual Funds

Mutual funds rank right up there with microwave ovens, sticky notes, and plastic wrap as one of the best modern inventions. To understand their success is to grasp how and why funds can work for you. Here are the benefits you receive when you invest in mutual funds:

  • Professional management: Mutual funds are managed by a portfolio manager and research team whose full-time jobs are to screen the universe of investments for those that best meet the stated objectives of the fund. These professionals call ...

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