When people think about investing, most automatically refer to stocks as the cream of the investing crop. For a first-time investor, the last thing you want to consider is investing in individual stocks. Stocks are extremely volatile and for someone who is unaccustomed to the habits of the market, an initial investment of $1,000 can amount to a loss of hundreds. Rather than dabbling in the stock market, would-be investors should pursue more stable and fruitful ventures, such as mutual funds.
Why Mutual Funds?
The idea behind investing in mutual funds is having the security of a diversified portfolio while risking only as much as you are comfortable. You can pick higher risk funds or if you are risk averse, pick a more stable market. All in all, a mutual fund is typically a less risky investment with decent return. Mutual funds are accessible to all investors, regardless of their portfolio or size of investment. They are completely non-discriminatory which means every investor gets the same attention and concern in how their money is handled. Again, for an inexperienced investor, mutual funds are the perfect place to get your feet wet.
How do Mutual Funds Work?
First, you want to shop around for a mutual fund. The key is to find a mutual fund manager with a long and positive track record as someone who can anticipate how the market will perform. Do a fair amount of research because this person will be responsible for your money and how it’s invested.
Once you have committed to that particular mutual fund, your fund manager will go to work with your money as well as that of other investors. Mutual funds operate with professional managers at the helm of their collection of investments. To ensure that your money, along with everyone else’s, is responsibly handled, mutual funds consist of several fund managers who have a long history with the market. They are the veteran pros of the investment league. Quite simply, they know what they’re doing.
Mutual fund managers also have a wide range of resources at their disposal. Along with their experience and supportive colleagues, managers generally have direct contact with brokers as well as a team of analysts. This is why mutual funds are so fruitful; they have the necessary information to ensure your money is where it should be.
A Little Money into a Little Bit More
By investing in mutual funds, you can reap the rewards (money) without having to do any of the work required for more volatile investments. With $1,000 put forth into a fund, you will have a solid investment and without any of the hardcore research needed…and you could turn a little money into a little bit more.