Staten Island, NY Financial Planner / Portelles Wealth Management Group
Mutual funds are an excellent way to
invest in stocks, bonds and other securities. They are a good choice
of investment because:
They are managed by professional money managers, so most of
the investment research is done for you. (Most investors don't have
the time or know-how to do all the necessary research.)
You diversify your investment risk by owning shares in a
mutual fund, instead of buying individual stocks or bonds directly.
Transaction costs are often lower than what you would pay if
you invested in individual securities (the mutual fund buys and
sells large amounts of securities at a time).
Before getting into our discussion of mutual funds, there are
three important points to keep in mind:
Past performance is not a reliable indicator of future
performance. Beware of dazzling performance claims. Many
publications recommend mutual funds based only on past performance.
Mutual funds are not guaranteed or insured by any bank or
government agency. Even if you buy through a bank and the fund
carries the bank's name, there is no guarantee. You can lose your
All mutual funds have costs that lower your investment
returns. Thus, even an index fund that mirrors a broad market index
cannot perform as well as its mirror index, since the fund has
transaction and operating costs that the index does not.
Once you determine your asset allocation model, you can implement
the recommended portfolio with mutual funds. You need only six to ten
funds to achieve diversification and your asset allocation
objectives, as opposed to having to buy many more individual
securities to achieve the same results.
Once you identify the asset classes that will be represented in
your portfolio, it's time to select specific funds in those
categories-i.e., funds that meet your investment goals. To choose
wisely, it's necessary to assess:
A fund's risk/reward history and characteristics, which
should match your own financial profile;
A fund's philosophy and investment style, which should match
your own investment goals;
A fund's costs, including loads and ongoing expenses; and
The customer service available from the fund.
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