What factors should always be considered prior to selecting a mutual fund, or other investment?
Before choosing any investment, you should match the mutual fund or other investment product to your: • investment goal; • time-frame, or time horizon, for needing the money to meet that goal; and • risk tolerance, or the amount of risk you are willing to take with these funds. Be sure to review Figure 1. Risk and Return in this unit. 3.Describe a mutual fund. How does it make money for investors? A mutual fund is an investment company that pools money from a large number of individual or institutional investors to buy and manage a portfolio of investments. The portfolio is purchased based on a given objective for the mutual fund that is stated in the fund prospectus. Typical objectives include growth, income, growth and income, or preservation of capital. Although the underlying portfolios may include some combination of investments, mutual funds fall into the three main categories of stock, bond, or money market. Investors make money from mutual funds in two ways: • Return to investo
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