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Mutual Funds
Why Mutual Funds?
Let's assume that Glenda wants to invest $1,000 in the stock market. She can buy the individual shares of one or two companies or she can invest the money in a mutual fund. Here are some of the features of a mutual fund and why Glenda might choose a fund over individual companies.
Click on each of the features on the left for a more complete understanding of why people invest in mutual funds.
| Diversification |
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In a mutual fund, generally you are diversified, and this may reduce risk. With her $1,000, Glenda may now own shares in 100 different companies through her one fund. |
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| Professional Portfolio Manager |
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Glenda is hiring an expert whose only job is to buy and sell according to the objectives of that fund. She now benefits from the same professional management as does the million-dollar investor. |
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| Convenience |
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The mutual fund handles all of the bookkeeping for Glenda. They will send her quarterly and annual statements, and a 1099 at the end of the year to tell her what to put on her tax forms, if it is a taxable account. |
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| Invest in Small Amounts |
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Most large mutual funds will allow you to invest with as little as $25 per month. |
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