mutual funds

Mutual-Funds

The rescuer of ordinary people ravaged by inflation. A mutual fund is a company that pools the savings of lots of people and then invests the money for them. Some funds have a very wide mandate, allowing them to invest in short and long term debt, stocks, foreign stocks, oil and other commodities. The majority of funds, though, are pretty specific in what they invest in. You’ll see everything from a foreign government bond fund (which invests in bonds issued by the likes of UK or Singapore) to an emerging markets stock fund (which invests in stocks issued by companies in developing countries)

Why invest with a mutual fund rather than go at it alone? There are several reasons, including information, skill, time, access, discipline, and size. Most mutual funds hire financial professionals to invest your money. They presumably have the time and skill to interpret a preposterously large amount of information on each and every company and security. Because trade are very large, they presumably have access to company officials and other experts that the likes of you and I don’t. And because they do this for a living, they presumably have the discipline to invest wisely, take profits appropriately, and bail out without regret when the rest of us would be drowning sorrows in scotch whiskey.

 

source: Common Cents by Nancy J. Kimelman, PhD

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