What Is A Mutual Fund? Reduce Risk And Maximize Returns

- By: Noel Swanson, 2008-03-18

Trust me, you will do much worse if your not investing in a mutual fund. It certainly will not make you the next Warren Buffet, but if you are looking for a safe investment, you have selected the right investment vehicle. More importantly, once you know what a mutual fund is, you will earn greater returns as you position yourself to diversify your investment portfolio.

Gaining Popularity

Mutual funds have gained popularity in the recent past as more novice investors are familiarizing themselves with what is a mutual fund. Today, most investors who know just about anything about investing have made investments in mutual funds because it is easy and you really do not need to be an expert on as to what is a mutual fund to invest your money wisely.

In learning what a mutual fund is, you will discover it has four advantages. They allow you to professional manage you money, they provide liquidity, they minimize risk through diversification, and the fees for investing are low.

When you start learning about mutual funds you will realize that professional fund managers manage the funds. Their objectives are to keep investing your money to yield the greatest return. What's more, you will realize that paying for such professional expert is expensive and you are getting the advise at very low fees. More importantly, mutual funds will offer you liquidity. You will be able to sell and buy anytime you want, as long as the stock market is open. That, is could you imagine selling a peace of real estate? How liquid is that?

As you learn more about what a mutual fund is, you will be excited at the level of diversification involved. Mutual funds are well diversified because they are invested in hundreds of stocks, money markets, and bonds. As you can well imagine, how could one person invest in all of this to achieve the level of diversification. You can't hence, the reason mutual funds are a great investment vehicle. Furthermore, because mutual funds get the advantage of large scale investments, their fees are low and range between two and three percent.

Before you invest in mutual funds, make sure you check John Caldwell's excellent free articles on advantages of mutual funds