Mutual Funds

A Mutual Fund is a security that gives investors access to a well-diversified portfolio of stocks, bonds and other securities. Each shareholder participates in the gain or loss of the fund. Shares are issued and can be redeemed as needed.

A Fund Family is a group of mutual funds offered by one investment or Fund Company. Each mutual fund has different characteristics and can range depending on investment objective. Most fund companies today offer a wide range of mutual funds for investors to choose from. A benefit to fund families is they often allow investors to transfer money between funds for a nominal charge or no charge at all (Exchange). Therefore, an investor who decides to exchange from a growth fund to a balanced fund could do so without any new sales charges if each of these funds were part of the same fund family and same share class.

Professional Management

The primary advantage of funds is the professional management of the investors’ money. Investors purchase funds because they do not have the time or the expertise to manage their own portfolio. A mutual fund is a relatively inexpensive way for an investor to get a full-time manager to make and monitor investments.

Diversification

By owning shares in a mutual fund instead of owning individual stocks or bonds, the risk is spread out or diversified. The idea behind diversification is to invest in a large number of assets so that a loss in any particular investment is minimized by gains in others. In other words, the more stocks and bonds the investor owns, the less any one of them can negatively affect the investor’s portfolio. Large mutual funds typically own hundreds of different stocks in many different industries. It wouldn't be possible for an investor to build this kind of a portfolio with a small amount of money.

Liquidity

Just like an individual stock, a mutual fund allows you to request that the investor’s shares be converted into cash at any time. Mutual funds are often more liquid than many other investments. Investors can sell their shares on any business day at the current sale price. The sale prices are calculated at the end of each business day, based upon the market value of the securities in the portfolio. Mutual funds are easy to purchase - easy to sell.

Affordability

Most mutual funds have initial investment requirements as low as $500 and subsequent purchases are often as low as $50 or $100 depending on the account type. It would be impossible to obtain such a diverse portfolio, as is attainable through mutual fund investing, with deposits of this size.

Flexibility

Change is inevitable; therefore, it may be important to look for a "fund family” - several different funds available from one fund organization. This enables the investor to transfer all or part of their investment into other funds with different objectives as their financial needs or goals change.

Investors share in the funds' earnings and capital gains. Some funds concentrate on income, others on growth, or a combination of both

• Fixed Income Funds invest in securities issued by the US Government, its agencies or by corporations. Tax-Free funds invest in municipal bonds. A mutual fund that seeks to provide stable current income by investing in securities that pays interest or dividends. Income funds typically invest in utility stocks and blue chips.
• Equity Funds invest in a broad, well-diversified group of stocks. An equity fund typically won't invest in any bonds or notes. The invested funds will either be in cash or stock.
• Balanced Funds invest its assets into the money market, bonds, preferred stock, and common stock with the intention to provide both growth and income. A balanced fund is geared towards investors looking for a mixture of safety, income, and capital appreciation. The amount the mutual fund invests into each asset class usually must remain within a set minimum and maximum. Once the investor determines those objectives, you can select a fund that best meets the investor’s needs.

For a complete discussion of all fees, charges, and penalties associated with this product, it is important that investors ask for a prospectus and read it carefully before investing or sending money. You can stop in at your First Market Bank branch or call the investments team at 1-804-327-5749 to get more information.