Bob Brinker's Marketimer

  Tuesday November 21, 2017

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PROFESSIONAL MANAGEMENT
Learn even more about this topic with the Encyclopedia of Personal Finance™

One nice thing about mutual funds is that they do the investment research for you. Mutual fund companies hire full-time professional managers to conduct research, analyze the market, and buy and sell securities for the funds. The portfolio manager is the person who selects a fund's securities. Managers buy and sell the investments according to funds' investment objectives.

A fund's director contracts with an investment advisor and his or her research staff to manage the fund. Fund investment advisors are usually highly educated and have five or more years' experience in analyzing securities. The advisor usually receives an annual fee based on a percentage of the fund's value. Sometimes a mutual fund has a management team rather than an individual manager. A mutual fund managed by a team may be able to conduct more thorough research than one managed by a single individual. Because mutual funds are professionally managed, you will have to pay management fees to invest in one.

Another advantage of mutual funds besides professional management is something called diversification, which we will discuss next.




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