Are Mutual Funds For You?

When you put money into a mutual fund instead of buying shares of individual stocks, you are essentially hiring a trained professional to pick your stocks for you. In good, active funds, the fund manager is trained to locate the best-performing stocks of the kind that you want to invest in. There are a lot of mutual fund families around these days as many as 12,000, by some estimates. There are mutual funds for people interested in investing in small companies, large companies, and sectors of the economy such as technology or health services, specific foreign regions or countries, environmentally sensitive companies, and the broadest array of companies under the umbrella of one big diversified fund. There are also mutual funds that charge you too much in sales charges and annual fees don’t perform as well as they should, and generally slow you down on the road to financial freedom. This chapter will show you how to stay away from those. It’s impossible to cover every type of mutual fund available. But it’s not hard to grasp the fundamentals of mutual funds, their basic terms and operating principles. The most important things to look for are good management, a long history of good performance, and very low fees and charges. And once you understand the general idea, you open your investment options wide.