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a guide to
Understanding Mutual Funds
A
mutual fund
is a type of investment company that investsin a diversified portfolio of securities.
The Investment Company Institute is pleased to bring you
A Guide to Understanding Mutual Funds.
This guide, one of several in the Institute’s Investor Awareness Series, isintended to explain mutual funds and the basic principles of investing.During the past decade, interest in—and information about—investing has increaseddramatically. Technological advances have ushered in a vast supply of new servicesthat allow you to invest with ease. Mutual fund shareholders have benefited from thesetechnological advances, as funds have continually offered improved services to meetchanging investor needs.Still, the most important advantages mutual funds offer over other types of investmentsremain unchanged since the first fund was offered in 1924: professional management—the security of knowing your money is managed by a team of professionals devotedto reaching your investment objectives—and diversification—the ability to investaffordably in a wide range of securities and reap market rewards while diminishingaccompanying risks.This guide is designed to increase your awareness of the benefits of funds andinvesting, and help you set realistic goals and expectations. If you would like tolearn more, please visit our website at www.ici.org.Paul Schott Stevens
President, Investment Company Institute
To The Reader
Introduction
...............................................................................................................................................2
About Mutual Funds
.................................................................................................................................3
What Is a Mutual Fund? ...................................................................................................................
3
Why Invest in a Mutual Fund? ..........................................................................................................4Stock Funds .......................................................................................................................................6Bond Funds ........................................................................................................................................
7
Money Market Funds .........................................................................................................................
9
Investing Internationally ..................................................................................................................
10
How Mutual Funds Are Structured .................................................................................................
10
Other Types of Investment Companies .............................................................................................
11
Establishing an Investment Plan
............................................................................................................12
Establishing Goals and Realistic Expectations ..................................................................................
12
Three Common Investment Goals ....................................................................................................13Figuring Out Your Retirement Needs ..............................................................................................
14
Dollar-Cost Averaging ........................................................................................................................
15
Establishing Realistic Expectations About Performance ..................................................................
16
The Risk of Inflation ..........................................................................................................................
17
The Annual Review ..........................................................................................................................
18
Tax Considerations ............................................................................................................................
18
Becoming an Informed Investor
.............................................................................................................21
The Mutual Fund Prospectus and Shareholder Reports ..................................................................
21
Publications and Websites ...............................................................................................................
22
How to Read a Mutual Fund Fee Table ............................................................................................
23
Should Fund Fees Affect Your Decision? ..........................................................................................
24
Protecting Investors—Who Oversees Mutual Funds? ......................................................................
26
Other Resources
......................................................................................................................................29
Useful Addresses ...............................................................................................................................
29
Questions About Business Practices ..................................................................................................
31
Glossary of Mutual Fund Terms ........................................................................................................
32
Table of Contents
of 00
The Annual Review for Understanding Mutual Fund
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| Upload Date: | 05/23/2009 |
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