Four
Benefits of Mutual Funds
An
estimated 54 million U.S. households owned mutual funds in mid 2002.1
That's roughly one out of every two households in the country.
Considering
several years of lackluster stock market performance, it's interesting that the
number of households owning mutual funds was down by only about two million from
2001, which was the highest year on record.2
Why have most mutual fund investors stayed the course during this volatile
period? Perhaps it's because they appreciate the advantages that mutual funds
have to offer.
Professional management. A mutual
fund is run by an investment company that pools money from investors to buy a
portfolio of securities.3 Actively managed
funds employ professional investment advisors who research, select, and
supervise fund assets, buying and selling in an attempt to generate investment
returns that meet the fund’s objectives.
Diversification. Investment
diversification is a touchstone of a sound financial strategy. Spreading risk
across a range of assets has the potential to offset losses from some securities
with gains in others. Mutual funds can offer an economical way to achieve
diversification in a portfolio because they generally include dozens or hundreds
of different securities, a level that would be hard for average investors to
achieve on their own.4
Liquidity. Mutual fund shares that
are held outside of a tax-advantaged retirement plan typically offer high
liquidity. Of course, it's wise to invest for the long term; but if the need
arises, mutual fund shares can typically be converted to cash on short notice,
generally without penalties.
Flexibility.
There are thousands of mutual funds to choose from that differ on the basis of
investment objectives and underlying securities. Whether you are pursuing growth
or income, or your goals are aggressive or conservative, there is probably a
mutual fund that is appropriate for your situation.
Even during times of volatile market activity, mutual fund shareholders have
demonstrated loyalty to this investment vehicle. Taking advantage of the many
benefits that mutual funds offer may help you reach your financial goals.
1, 2) Investment
Company Institute, 2002
3) There are fees and expenses associated with investing in mutual funds,
including portfolio management fees and expenses and sales charges. Mutual funds
are sold by prospectus only. Be sure to read the prospectus carefully before
deciding whether to invest.
4) Diversification does not guarantee against loss; it is a method used to help
manage investment risk.
©
2002 Emerald Publications
