- Our Team
March 21, 2023
Mutual funds have been one of the most popular ways to invest in the stock and bond markets, especially as part of employer-sponsored 401(k) plans and self-directed individual retirement accounts. Mutual funds allow you to buy a diversified collection of assets in just one fund, often at a low cost, without the difficulties of purchasing and monitoring dozens of assets yourself. And passive investing lets your investments follow an index, like the S&P 500.
There are literally thousands of available funds. Equity funds are the type of fund most owned. Once you find a mutual fund with a good record, you can let the fund managers — or a benchmark index in the case of index funds — do the heavy lifting.
The main disadvantages? You’ll incur fees no matter how the fund performs, although fees on passively managed funds are much lower than on actively managed funds. Another is lack of control — you have no say over the fund’s purchases.
You can lose money in mutual funds, but diversification means that you spread risk across a number of companies or industries. Mutual funds are priced at the end of each day at the value of their holdings at market close.
Some factors in determining how to invest in mutual funds include the following:
Tips on overseeing your funds
How about managing your investment? You could rebalance your portfolio once a year to keep it in line with your diversification plan — selling off some gains and investing more in another category to regain balance.
Mutual funds come in many flavors. Equities include growth funds, income funds and sector funds. Each tries to maintain a portfolio of stocks with certain characteristics. Value funds invest in firms considered undervalued, based on company fundamentals. Balance funds mix stocks, bonds and other securities. Blended funds include a mix of value and growth stocks. And funds of funds invest in groups of mutual funds.
Although mutual funds can be fairly safe, there’s a wide range of risk. For example, a mutual fund that invests in well-established large-cap companies probably is less risky than funds that focus on developing companies or those in just one sector.
No matter the fund, your mutual fund investment can increase in value in multiple ways: dividend payments, which you can receive directly or have reinvested in the fund; capital gains, which are distributed annually but you may see a large tax bill in years with high capital gains payouts; and The total financial worth of the underlying assets is valued after the close of the market. The price per mutual fund share is known as its net asset value. As the value of the fund increases, so does the price to purchase more shares.
Be sure to discuss mutual funds, like all investing vehicles, with a financial adviser so you understand the risks, long-term outlook and tax implications.
September 21, 2023
If you want a retirement plan for your small company or self-employed business — but you don’t want to be buried in paperwork — consider a simplified employee pension plan or SEP. Among the appealing advantages: 1. SEPs are set up by simply filling out a brief form. 2. Form 5500’s aren’t required to be […]
September 19, 2023
When your company sponsors a qualified retirement plan, you must comply with complex rules established by the IRS and the Department of Labor. Ignore the rules and your firm could face costly penalties from federal regulators — and plan participants might sue you for mishandling trust assets. This is no time to be a do-it-yourselfer. […]