Since most investors are buying mutual funds for the long-term, and most are moderate investors that want to take some risk to get higher returns (but not a high level of risk) we’ll focus on building a portfolio for this investment objective (long-term, medium risk). Here are some of the best funds to start a long-term portfolio:
Mutual Funds Are Liquid. If you need to withdraw money from your brokerage account, you can get cash from most mutual funds within a few days. If you want to sell your mutual fund, the proceeds from the sale are available as soon as the day after you sell the mutual fund. Some mutual funds have a ”settlement” period of up to three days. But this level of liquidity (quick access to your money), is much better than some investment assets, such as real estate. Mutual Funds Have Audited Track Records : A mutual fund company must maintain performance track records for each mutual fund and have them audited for accuracy, which ensures that investors can trust the mutual fund’s stated returns. Mutual fund companies also offer a prospectus for each fund, as well as semi-annual or annual reports. These documents provide a wealth of information about how the fund invests, the amount of assets under management, the internal fund expenses, and more.
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.
Equity and fixed-income funds have subcategories which allow an investor to cast a narrow net with their investment dollars. For example, an equity fund investor might invest in a technology fund that only invests in eco-friendly technology companies. Likewise, a bond fund investor who is seeking current income might invest in a government securities fund that only invests in government securities. A so-called balanced fund is a mutual fund that owns both stocks and bonds.
Opening an investment account is incredibly easy at most mutual fund companies. The easiest way to open an account is online. Information required will include things you already know, such as your name, address, date of birth, and social security number. You’ll also need to know which type of account is best for your investing needs. Here are the basic account types and how they work: Individual Brokerage Account: This is a regular brokerage account established for an individual (one person). Contributions are not tax-deductible, and investors pay taxes on capital gains and dividends. For more on this, see this article on taxation of mutual funds.