A mutual fund is a fund headed by a professional money manager. Investors like you and me buy the shares in the fund and in doing so, we surrender the responsibility of investing over to the money manager. Some funds invest in stocks, some in bonds, and some in a combination of both. All funds are invested according to stated objectives or guidelines. Note that investors don’t buy the actual stocks and bonds, the fund buys the actual stocks and bonds, and investors buy shares in the fund. Mutual funds are one of the most popular investments available today.
Mutual funds provide instant diversification. When you invest, it’s important that not all your money is in one place. What happens if that investment turns out to be the worst investment that ever happened? Funds own many companies, of many different sizes, and in many different industries. So your risk is spread out. If one financial freedom com stock tanks, it can be offset by others doing well, so overall you’ll be all right.
Mutual funds allow you to invest in profitable financial freedom com businesses you may not understand. Imagine a person avoided investing in the cell phone industry because they thought analog roam was a suburb of Italy’s largest city. This person should buy mutual funds. You get professional money management for pennies on the dollar with mutual funds. You save time by not having to go select individual stocks and your money is fairly liquid because you’re buying and selling shares in the financial freedom com mutual fund, not the actual stocks themselves. You can get in and out with ease.
People serious about getting loaded with mutual funds only invest in no load mutual funds. No load means no sales fee. Don’t buy a mutual fund that has a load. There are front end loads, where you pay a sales commission when you buy it. There are also back end loads, where you pay a sales commission when you sell it, and of course there are funds that charge you when you buy and when you sell. Don’t listen to the salesperson’s load either.
There are two types of mutual funds: open ended funds and closed ended funds. Open ended means that the fund issues an unlimited amount of shares. They calculate the value of the shares by adding up the total value of the fund’s holdings and dividing it by the number of outstanding shares. If the fund has $10 million worth of assets and one million outstanding shares, the price per share is $10. This value is called the net asset value, and it is calculated on a daily basis.
Closed end funds issue a limited number of shares. These shares are traded over markets like the New York Stock Exchange. The beauty of closed end funds is that at times shares can be bought at a discount. If the fund has a hundred shares selling, then the price of the entire fund is $1,000.
Together we shall win,
Adesegun Akitoye
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