Investing in a mutual fund is usually a simple process. You may contact a fund family to set up your investment, use the services of an investment adviser, or even invest through an online broker. The hard part of investing in a mutual fund, however, may be figuring out what you want from your investment and choosing the right one. This typically involves comparing mutual funds based on their goals, past performance, costs, and management.
When you want to invest in mutual funds, the first step is usually gaining a firm understanding of this type of investment. A mutual fund pools money from many different investors and invests the money collectively. When you invest in mutual funds, you earn a portion of the earnings. Many people like mutual funds because they often allow investors to get started with smaller initial investments, and the manager makes the decisions for buying and managing the fund’s holdings.
Once you understand what mutual funds are and how they work, the next step is deciding the type of fund in which you want to invest. If you are primarily interested in the growth of your investment, for example, you may invest in mutual funds that work toward capital growth. If, on the other hand, your preference is for regular income, you may choose to invest in income funds. Sometimes, however, investors are interested in both the growth of capital and income. In such a case, you may do well to choose a growth-and-income fund that targets both of these goals.
After deciding the type of mutual fund in which you want to invest, you may then consider minimum investment requirements and costs. Depending on your unique financial situation, you may have a preference for a mutual fund that offers a low minimum investment. Each mutual fund will have different investment minimums, but there are many that will allow you to start with as little as $100 US Dollars. Additionally, you may do well to choose one that doesn’t require you to pay sales charges or that keeps these charges low.
It is also important to evaluate the management and past success of the funds you are considering before you invest in mutual funds. Many financial experts recommend choosing a mutual fund that has retained the same manager for a long period of time. Choosing a mutual fund that has performed well for a significant period of time may prove helpful as well. You can find information about a mutual fund you are considering by reading its prospectus or by researching online.
When you've decided to invest in mutual funds and determined how much you can afford, you may contact the fund families, seek an investment adviser's help, or contact a brokerage to make your investments. You may choose to make a lump-sum investment or choose an automatic investment plan. If you choose an automatic investment plan, an investment amount that you designate is usually withdrawn from your bank account each month. Each mutual fund may have unique investment minimums and options.
