Variety: Mutual Funds Come In Many Different Categories and Types. As you grow your portfolio of mutual funds, you will want to diversify into various mutual fund categories and types. You can invest in mutual funds that cover the main asset classes (stocks, bonds, cash) and various sub-categories or you can even venture into specialized areas, such as sector funds or precious metals funds. Affordability: Mutual Funds Have Low Minimums, Most mutual funds have minimum initial investment requirements of $3,000 or less. In many cases, if the investor initiates a systematic investment program, where they have a fixed dollar amount or fixed number of shares purchased once per month, the initial investment can be as low as $1,000.
Mutual funds give investors the ability to diversify across a wide variety of investments that they otherwise may not carry in their portfolio as individual securities. Since mutual funds invest in a diverse range of securities and investment options, one mutual fund share actually represents proportionate ownership in each and every investment in the mutual fund’s portfolio. Of most interest to investors is that each share also proportionately represents the profits of those investments as mutual funds are required to pass along profits to their investors by way of mutual fund distributions, which come in several forms.
#vanguard total bond market index fund investor shares morningstar#morningstar funds#vanguard total international stock index fund admiral shares morningstar#vanguard total international bond market index fund institutional shares#vanguard total international stock market index fund review#vanguard total international stock index fund admiral shares (vtiax)#vanguard total bond market ii index fund investor shares morningstar#vanguard total bond market index fund admiral shares ticker#vanguard total international bond market index fund investor shares#stock research#vanguard total international stock index fund admiral shares#vanguard total international stock index fund admiral shares fact sheet#vanguard total international stock market index fund institutional shares#best funds#vanguard total global stock market index fund#vanguard total international bond market index fund admiral shares#vanguard total international stock market index fund#vanguard total international stock market index fund admiral sharesrating
The reason why diversification is important is that investing in just one or two securities can be too risky. For example, if an investor buys just a few stocks and those stocks see significant declines in price over a short period of time, the investor’s portfolio can drop dramatically in value. But if the investor buys a mutual fund that holds 100 stocks, and a few of those stocks see price declines, the impact on the investor’s account value is less.
Mutual Funds Are Diversified Investments. The nature of mutual funds as pooled investments that are professionally managed means that investors generally can easily accomplish one of the most important standards of smart investing — diversification. To diversify means to spread market risk by holding a variety of several different securities, rather than just a few. Most mutual funds invest in dozens or hundreds of stocks or bonds within one portfolio. Depending upon the type of fund, this accomplishes the fundamentals of diversification with as little as one or two mutual funds. However, when building a portfolio of mutual funds, especially as investment assets and objectives grow more complex over time, investors are smart to diversify across several funds in different categories.
However mutual funds can be significantly less expensive. A mutual fund manager will place all the necessary trades to maintain the mutual fund portfolio but the investor may only be responsible for one low expense. But if investors are not careful, investing in mutual funds can be more expensive than buying individual stock securities. To keep costs low, mutual fund investors are wise to buy no-load mutual funds with low expense ratios. Costs can also be minimized by investing with one of the best no-load mutual fund companies like Vanguard, Fidelity or T. Rowe Price, all of which have a diverse selection of no-load funds with low expense ratios.