Mutual Funds allow investors to achieve a high level of diversification through ownership of a large number of securities and provide portfolio management by experienced professionals. There are numerous funds with varying degrees of risk and investment objectives which allow for diversification.
The concept behind mutual funds is simple: Many people pool their money in a fund, which invests in various securities depending on the funds stated investment objective, as found in its prospectus. Each investor shares proportionately in the fund's investment returns -- the income (dividends or interest) paid on the securities and any capital gains or losses caused by sales of securities the fund holds.
There are many types of mutual funds to match the tastes of the individual investor based on their investment objective and risk tolerance. They offer diversification in a client’s portfolio with affordable, minimum additions.
There are many different mutual funds in which to invest. Some examples include growth and income funds, which buy shares of established companies; sector funds, which buy shares of companies in a particular sector, such as technology or health care; and index funds, which buy shares of every stock in a particular index, such as the S&P 500. There are also bond funds which range anywhere from government bond funds to more risky high-yield bond funds, also known as junk bonds. If you need ways to help on your income tax bill you might consider municipal bonds.
Before investing in a fund, take the risk factors into account. Past history is no indication of future returns.
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There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not ensure against market risk.
Investing in specialty market sectors carry additional risks such as economic, political or regulatory developments that may affect many or all issuers in that sector.
Mutual funds are offered with a prospectus. Investors should consider the investment objectives, risks and charges and expenses of the investment company carefully before investing. The prospectus contains this and other information about the investment company. You can obtain a prospectus from your financial representative. Read the prospectus carefully before investing.