Supposedly safer than stocks but with more return than a typical CD, mutual funds are collections of stocks and bonds that you share with other investors. Each investor owns a portion of the bond in shares, and it is managed by a financial professional.
Mutual funds are an easy way to begin investing because they often don’t require a large initial investment. Some can even be started with as little as a few hundred dollars. Also, since the stock is managed by a professional, mutual funds can be a great way to start investing because you won’t be required to manage your own portfolio.
Sounds great, right? According to Investopedia.com, you shouldn’t begin any sort of investment without understanding the risks. Always understand the costs in any investment. In the case of investing in mutual funds, remember that the professional maintaining your stocks has to be paid. Keep a close eye on hidden investment costs, and do your research! There are more than 10,000 types of mutual funds, and some come with higher risks than others. Make sure you understand what these funds entail so you aren’t blown away with negative results should they arise.
Mutual funds… Might not be the right time for me.