Understanding Mutual Funds

Simply put, a mutual fund is a company that makes investments on behalf of its shareholders. The fund pools your money with money from many other people who have similar investment objectives. Professional money managers then take the pool of money and invest it in securities, such as stocks, bonds and money market instruments.

Mutual funds can make money for you in two ways. One, they can pay dividends earned from the funds’ investments. And two, if a security held by a fund is sold at a profit, the fund can pay capital gains.

As a shareholder, you own a proportionate share of the fund. Each share represents ownership in all the fund’s underlying securities. Funds pay dividends and capital gains in proportion to the number of fund shares owned. Thus, if you invest $1,000 you’ll get the same rate of return as if you invest $10,000.

Mutual Funds Provide the Basics for Smart Investing

Diversification
Your best protection against risk is diversification – spreading your investment across dozens of securities instead of just one. Mutual funds provide an assortment of investment options. They offer growth, income, or both, and the opportunity to invest in international markets, as well as the U.S.A. fund’s portfolio managers typically invest in as many as 50 to 200 or more different securities. In effect, they put your money in many baskets instead of just one. Only the most affluent investors can attain the diversification on their own that mutual funds can for their shareholders.

Professional Management
With mutual funds, you have built-in professional money managers who base their buying and selling decisions on extensive, ongoing economic research. After analyzing stock market conditions, interest rates, inflation and the financial performances of individual companies, these managers select investments that best match the fund’s objectives.

Professional money management has long been available to large institutions and wealthy investors. Mutual funds make this type of financial expertise accessible to everyone.

Growth
Mutual funds create the possibility of higher long-term returns than conventional savings. Today, mutual funds manage more than 131.8 million shareholder accounts valued at about $2.8 trillion. They have become the nation’s third largest financial intermediary – behind commercial banks and life insurance companies.

One reason for mutual fund growth is their performance record in relation to what individuals might expect by investing on their own. Of course, performance varies from fund to fund, but on average and over the long run, the growth of stock funds has paralleled the growth in the U.S. economy. Additionally, bond and money market funds have reflected the long-term movements in their respective markets.

Preferred Securities Group, Inc.
5301 N. Federal Highway, Suite 150
Boca Raton, Florida 33487
1-800-909-9150
Tel. (561) 998-2170
Fax (561) 998-2177
Email: info@preferredsecurities.com

Member N.A.S.D., S.I.P.C.
Florida