If you're the type of investor who is into long-term investing and prefer a diverse portfolio, a mutual fund is a type of investment to look into.
A mutual fund is a company that gathers funds from many investors and invests the money in the stock market, bonds, money-market instruments, and other securities or assets. All of these holdings that the mutual fund owns is known as its portfolio. Each share represents an investor's proportionate ownership of the fund's holdings and the income those holdings generate.
Advantages and Disadvantages of Mutual Funds
MoneyInstructor.com does a pretty good job of listing the advantages and disadvantages of investing in mutual funds...Financial expert Rick Goldfeller also offers advice on investing in mutual funds...
I like the idea that when you invest in a mutual fund, you're not putting all of your money in one nest egg. Money gets spread out to various investment vehicles, thus minimizing the risk.
Investor Beware
Keep in mind that when you do invest in a mutual fund, you are giving your money to a money manager. As I've said time and time again, make sure to do your homework. Make that company earn your trust!
In the video below, the question is answered: Are mutual funds risky?
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The smartest thing I ever read on funds is that funds tend to do best during their growth phase as capital is flowing in. During this time, the fund manager gets to trade when they want. Whenever money starts flowing out, many times it signals that the fund is no longer healthy. The manager has to accept losses to pay investors who are leaving the fund. For this reason it's best to look for newly established funds with experienced traders building them up.
I finished a new post and cleaned up the last one by the way. Hope you like it =)