Bob Brinker's Marketimer

  Sunday December 9, 2018

Next Marketimer © Mailing Date: December 4th

© 1997-2018
Privacy Policy

Hosted by:

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

Buying shares directly from a mutual fund tends to be cheaper than buying single stock shares yourself. This is because mutual funds buy or sell thousands of shares a day, reducing transaction costs dramatically.

To buy or sell shares from a mutual fund, you make an initial deposit to open an account. You can buy or sell shares from the money in your account over the phone or online. When you redeem your fund shares, you'll receive a check for the net asset value (NAV) of the shares. You can redeem your shares for cash anytime, also via the phone or online. The funds from your redemption are usually available within a day or two and can be wired directly into your bank account. Some funds allow you to receive regularly scheduled withdrawal checks. Dividends can be received in cash or reinvested back into the fund to buy more shares. Proceeds from redemption of shares are subject to capital gains tax if you redeem them at a profit.

For even more convenience, you can participate in a mutual fund's automatic investment program to purchase mutual fund shares on a regular basis. With automatic investment, a fixed amount of money is automatically taken out of your bank account on a regular basis to buy shares.

It is just as easy to choose a fund from a fund family that matches your investment style and risk tolerance. Different types of funds have different risk levels and investment strategies. Some seek maximum growth of capital while others seek high interest returns; still others try to balance both objectives. You can choose from aggressive growth funds, growth and income funds, and fixed-income funds.

Mutual fund companies are required to send you a fund prospectus containing necessary information about each mutual fund.

The most important areas to look at in a prospectus are investment objective, management, costs, and performance. All of this information is usually found in the first few pages of the prospectus.

To conclude this tutorial, let's summarize the ways in which a mutual fund offers an investor a complete investment package.


Powered by

Copyright ©1999-2018, Precision Information, LLC. All Rights Reserved