How Do I Buy a Mutual Fund? Mutual funds are primarily bought in dollar amounts unlike stocks, which are bought in shares. Mutual funds can be purchased directly from a mutual fund company, a bank, or a brokerage firm. Before you can start investing, you’ll need to have an account with one of these institutions prior to placing an order. A mutual fund will be either a “load” or “no-load” fund, which is financial lingo for either paying a commission or not paying a commission. If you are using an investment professional to assist you, you will likely need to pay a load.
Investment Costs Are Low for Mutual Funds. Investors tend to overlook many aspects of building and managing a portfolio, and the most negative impact of those overlooked items often comes from expenses. Depending upon the brokerage firm or investment company, investors may be charged commissions for each purchase or sale of single securities, such as stocks. This can add up to hundreds of dollars per year, per account, depending upon the frequency and size of trades.
Building Wealth Mutual Funds. Mutual funds are the best way for the most people to build wealth. Not everyone can become a successful business owner or rise to the top ranks of a large corporation. But saving and investing for the long term with mutual funds can be accomplished by almost anyone. While there are a plethora of investment options (individual stocks, ETFs, and closed-end funds, to name a few) a mutual fund can offer a simple, efficient way to invest for retirement, education or other financial goals.
Before you invest in mutual funds, you should do your homework. And fortunately, we’re here to help you with that! Which funds are the best to use? Will you choose to use mutual funds, closed-end funds, ETFs, and/or individual stocks and bonds? Inevitably, your homework assignment will lead you to articles outlining the disadvantages of mutual funds. But are all of these so-called disadvantages of mutual funds really disadvantages of mutual funds? Let’s take a look at several so-called disadvantages of mutual funds, and how you can avoid them.
Think of mutual funds as investment baskets of securities. Each basket has its own objective and manager (or management team). The manager also has a team of analysts that assist in doing the research. Also keep in mind that, when it comes to management, mutual funds fall into two primary categories — one is active management and the other is passive management. Managers of actively-managed funds will use their resources to try and ”beat the market,” which is to say that they’ll attempt to outperform a certain benchmark, such as the S&P 500 index. However, the manager of a passively-managed mutual fund will not try to beat the index but will instead buy and hold a basket of stocks that will replicate the holdings and performance of the index.