What is a mutual fund?
A mutual fund is a collection of different investments owned by a pool of investors. By joining a pool of investors, you gain access to a more cost-effective way of diversifying your investments – and the potential for stronger returns over the long term – than many investors could achieve on their own. Mutual funds are professionally managed by portfolio managers who oversee a basket of securities according to the fund’s goals and investment objectives.
Mutual funds can invest in many types of investments, including stocks, bonds, money-market instruments and other securities. Mutual funds may also invest in other mutual funds. Each fund has its own level of risk, which depends greatly on the types of securities it holds. In addition, each mutual fund has its own investment goals, ranging from income generation to long-term growth to capital preservation. In general, funds with higher potential returns come with higher levels of risk.
Mutual funds are well suited for people who may not have the time or expertise to invest directly in individual securities like stocks or bonds, and want the convenience of having a professional asset manager making the investment decisions.
Investors can make money on a mutual fund if the value of the fund’s investments goes up and investors sell the fund for more than they paid. Depending on the fund, investors may also receive distributions of dividends, interest, capital gains or other income the fund earns on its investments. Distributions can be paid in cash, or reinvested in the fund.
To learn more, speak with your financial advisor today or call Sentry Client Services at 1-888-698-5553.