FREE ESSAY ON MUTUAL FUNDS

MUTUAL FUNDS

Mutual Funds
A mutual fund is a large pool of money that investors create which is used to buy many
different stocks, rather than just buying an individual stock. Because all these
investors have combined their money, they can afford to buy many different stocks. A
mutual fund is managed by a portfolio manager. He or she controls all of the investors'
money and invest it into a group of stocks or bonds and decides how much to invest in
each stock. A mutual fund has a price, like a stock (Net Asset Value). It tells you how
much one share of that mutual fund costs. When you buy stock, you have to pay a
commission. However, the fees involved with investing in a mutual fund are often much
less in comparison. There are currently over 6,000 mutual funds available to investors
and each one has its own unique style of investing. Here are some of the funds that you
may want to consider:
Balanced Fund: These funds are probably best for conservative investors (those who try to
minimize their risk). These funds often invest in many different stocks and bonds. Some
balanced funds invest in over 200 stocks. By doing this, they minimize your risk while
also providing fairly stable growth. 
Dividend Growth: These mutual funds use a special kind of investing strategy. They look
for stocks that pay dividends and determine the health of the company by seeing how fast
the dividend payments are growing. When a company is doing well, it often raises its
dividends. The fund managers look at these as the key factor in deciding which stocks to
buy. Companies that pay dividends are often large, well-established companies. Therefore,
dividend growth funds are fairly safe investments but they also provide quite a bit of
growth. 
Capitalization Funds: These funds invest in companies whose market capitalization (the
total value of all of their stock) falls into their area. Small-cap stocks are those that
have market caps of less than $1 billion. Mid-cap stocks are those with market caps in
the range of $1-5 billion. Large-cap stocks are those with market capitalizations of at
least $5 billion. 
Index funds: are seen as the best type of mutual funds to invest in because they
outperform 85% of all mutual funds. These funds invest in stocks that make up stock
indexes such as the S&P 500. These funds also have fewer fees because they buy and sell
stocks less often. Also, because they sell stocks less often, the capital gains are
usually seen as long-term so you will pay less when tax season comes around. 
Mutual funds are great for people who don't want to take as much risk with their money.
Mutual funds are less risky because they buy a bunch of stocks. If one stock does poorly,
you won't lose as much money as you would if that was the only stock you owned. Mutual
funds are also good for people who don't want to spend too much time investing Many
people who want to invest are somewhat afraid to actually do it. Investing is an
important step to becoming rich in the long-term so mutual funds offer a safer way to
reach your goals. I think everyone should invest in mutual funds instead of buying stocks
because stocks aren't always as safe as mutual funds and I think everyone should invest
as early as possible.