In today’s complex financial marketplace, mutual funds offer investors a simple, convenient way to invest. Mutual funds are investment pools that may invest in stocks, bonds, and other securities. Each allows you and investors with similar objectives to pool your capital and achieve goals as a group that you might not be able to achieve individually.
One of the most valuable features of mutual fund investing is professional management. Each fund is under the direction of a manager or management team that makes specific buy and sell decisions for all securities in the portfolio. The portfolio managers draw upon their experience and the fund family’s research to make sound investment decisions.
Diversification is an important investment goal you can achieve by investing in mutual funds. It reduces your dependence on the success or failure of any one security. Investors who don’t have large sums to invest can build a diversified portfolio with mutual funds more easily than by investing in individual stocks and bonds. You can achieve even wider diversification by selecting several mutual funds with varying investment objectives or styles of management.
Mutual funds also increase your flexibility. Most funds offer discounts, called rights of accumulation, for larger amounts, allowing investors to purchase shares at a reduced rate. Many offer systematic investment plans, allowing you to invest a specific amount in regular installments over a period of time, rather than investing a large amount of money all at once. You may also reinvest dividends and capital gains into the fund. And many funds have systematic withdrawal features, which allow you to designate an amount you wish to receive from your fund on a regular basis.
There are four basic types of mutual funds: stock, bond, hybrid (which invest in a mix of stocks and bonds) and money market. Stock, bond, and hybrid funds are generally considered long-term funds. Money market funds are referred to as short-term funds because they invest in securities that generally mature in one year or less.
In recent years, the number of mutual funds with different investment objectives has grown. As a result, it is also useful to categorize mutual funds by their investment objectives, including growth funds, aggressive growth funds, growth and income funds, balanced funds, international funds, high-yield bond funds, and municipal bond funds. Your BB&T Scott & Stringfellow Financial Advisor can help you evaluate the choices available and select the funds that are most appropriate for your situation.
For more information on any mutual fund, including a discussion of risks, charges and expenses, obtain a prospectus from your BB&T Scott & Stringfellow Financial Advisor. Please read the prospectus carefully before you invest or send money.