Invest in the Stock Market by Proxy Using Mutual Funds

By: Amit Kheterpal

If you are tired of keeping track of your stocks and also need some professional help managing your portfolio of stocks then your best bet is to turn to mutual funds.

In simple language mutual funds are large companies who take money from each investor and then pool that money and buy stocks in the market. There is a mutual fund manager who is an expert in the stock market and he is in charge of delivering good returns on your money. The basis of a mutual fund is that it relieves you the headache of managing your stocks and in turn they do all the dirty work. For this dirty work of managing your money and delivering returns the mutual fund company charges you some amount which is known management fees. This is not to say that there is no risk in investing in the stock market using mutual funds. You carry exactly the same risk as you have earlier if you were investing in the stock market on your own. The only difference is that now there is an expert managing your money relieving you of the headache of managing the stocks individually.

These mutual funds are not insured by FDIC or even the bank which is selling the funds. These carry the same amount of risk that the stocks carry. Most mutual fund companies say that they have been generating good returns over the last few years but that in now way is a guarantee that the mutual funds will generate the same returns in the future. These are mere advertisements that are designed to lure you. These tell you about the how the mutual find has performed which in some measure will tell you about the fund manager and his abilities. That is all the past performance will tell you but it cannot guarantee you anything.

That said your best bet is to research before investing in a particular mutual find. Different funds have different investing strategies and styles so make sure your pick the one which suits your style. Some may be more aggressive than the others or some may be more passive than the others. Some may use more risky methods which may not be your style. Also compare the fees and the costs that they charge as that can impact the returns that they give. Another fact to note is that the mutual funds are not sold through the exchanges but you can buy directly from the firm or the bank which is the authorized distributor of these funds. You can always sell the mutual funds back to the company and get your money back.

Invest wisely and you can get handsome returns from the mutual funds.

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