The Mutual Funds Advantage

Mutual Funds A mutual fund is a professionally managed type of group investment that pools money from several investors and puts it in stocks, bonds, short-term money market instruments, and or other securities. Mutual funds are also known as open-end funds. The first such fund was Massachusetts Investors Trust, founded on March 21, 1924, which had, after one year, 200 shareholders and $392,000 in assets.

If you are risk averse, there are several types of bond funds that you can look into. One of the safest is any fund made up of US treasury bonds. Funds that invest in mortgages secured by the Government National Mortgage Association are also backed by the full faith and credit of the US Government. Next on the list are municipal bond funds, with taxable bond funds issued by corporations being another consideration.

The greatest advantage to using mutual funds is diversification, which reduces risk without sacrificing returns. Another advantage is that mutual funds are professionally managed, and you pay a very low price for the fund manager’s expertise. Most of us would not want to spend the amount of time it takes to observe, research and trade the market every day, even if some of us are better at picking stocks than the fund managers and their support staff.