The Financial Planning Center
Comprehensive Financial Planning
Why Invest In Mutual Funds
Mutual funds can be a great way to diversify any portfolio whether you are a beginner or an experienced professional.
For investors with less experience, mutual funds offer a means of investing in the market with the help of a professional money manager. Unlike the average individual, money managers have the time and resources to research a wide variety of stocks in many different sectors. Click here to learn more about mutual funds.
One major reason for investing in mutual funds is to reduce risk through diversification. A heavily concentrated position can be disastrous if that particular issue falls in price or, worse yet, goes out of business. While diversification can never guarantee you won't experience losses, establishing numerous positions in different industries can help reduce the amount of risk in a portfolio. Risk is associated with volatility. If a portfolio tends to be more volatile, we consider it to have a higher degree of risk. A dilemma individual investors soon face is the lack of capital to establish a truly diversified portfolio. For example, if you purchased 100 shares of stock at $50.00 for 20 different issues, your cost, not including commissions, would be $100,000.00. On the other hand, a very small initial investment in a mutual fund allows you to be highly diversified without having to pay multiple commissions. To further diversify your portfolio, choose a variety of funds. When selecting a diversified portfolio of mutual funds avoid a common mistake. Don't just pick a few good performing funds, ensure they have different objectives with different investments. Click here to see how to structure a diversified mutual fund portfolio.
Another important reason for investing in mutual funds is not having to time the market. There is so much information available today there may even be too much information. This is known as information overload. Mutual fund managers, along with their team of analysts, are better able to filter out what news is pertinent and react to it by increasing or decreasing holdings as they deem necessary. Mutual fund managers actively manage the fund's portfolio according to market conditions so you don't have to micromanage it yourself. Remember that mutual funds are generally for long-term investing; they are usually not appropriate for short-term trading.
Even for the most experienced investors, mutual funds can still serve a purpose. With so many investment options available trying to micro manage ones portfolio down to the company would be a daunting task. Invest in the companies you know in the sectors you understand. For situations you feel may offer a great investment opportunity but you avoid due to lack of understanding or the inability to obtain information, consider a mutual fund.
If You Desire More Time to Pursue Life's Pleasures, Find Out How a Certified Financial Planner Can Help.
Contact: ProActive Financial Planning
| HOME | SITE MAP | MUTUAL FUND CENTER | IRA CENTER | EDUCATION CENTER | BOND CENTER |
The www.open-ira.com and ProActiveFinancialPlanning.com websites is for information, education, and entertainment purposes only. This is not a solicitation or offer to purchase or sell any security. This information is not intended to be used as the primary basis for investment decisions, nor should it be construed as advice designed to meet the particular needs of an individual investor. You alone will need to evaluate the merits and risks associated with the educational material provided. Decisions you make based on information contained in this web site are your sole responsibility. Mutual funds involve risks and investment returns and principal value will fluctuate so that when shares are redeemed, they may be worth more or less than original cost. Performance of classes will differ. Before investing in any mutual fund, be sure to request a mutual fund prospectus from the mutual fund company. The prospectus contains important information, including information on fees and expenses. Read it carefully before investing. Past performance is not a guarantee of future results. None of the information provided on this web site should be construed as tax advice. You are advised to consult your own tax professional regarding the tax consequences of your financial planning strategy, IRA strategy, investment activities, and all other tax related issues. Use of hyperlinks to other internet resources is entirely at your own risk. The fact that such links may exist does not indicate approval or endorsement of any material contained on any linked site. The information and opinions obtained from other sources and services are considered to be reliable but we do not guarantee its accuracy. Information from other linked sites is independent of ProActive Financial Planning or any other party affiliated with this website. In no event shall ProActive Financial Planning or any other party affiliated with this website be liable for any damages, including without limitation direct or indirect, special, incidental, or consequential damages, losses or expenses arising in connection with this site or the use thereof or inability to use by any party, or in connection with any failure of performance, error omission interruption, defect, delay in operation or transmission, computer virus online or system failure, even if ProActive Financial Planning or representatives thereof are advised of the possibility of such damages, losses or expenses.
Trademarks, Copyrights, and Other Proprietary Rights
All content, information, and images available through the www.open-ira.com and www.proactivefinancialplanning websites are the property of ProActive Financial Planning and are protected by copyrights, trademarks, service marks, patents and other proprietary rights and laws. You may not copy, republish, redistribute, transmit, alter, edit, or exploit in any manner for any purpose content and information in, or derived from, this web site, without the expressed written permission from ProActive Financial Planning.