Mutual Funds: Selecting A Fund
You’ve decided that you want to invest in mutual funds. So what do you do now?
First, you need to know exactly what it is you want to accomplish financially and in what kind of time frame. Are you saving for retirement or the kid’s college fund? Maybe a second home? Whatever the case, you must have a clear cut financial goal in place before implementing any investment strategy.
Second, what is the time frame that you’re looking at? 20 years? 40 years? The longer the time frame, the better your investment opportunities are. Knowing the answers to these questions will help you select the right mutual fund and the route you must take financially.
If you’re aiming for the most in capital growth and profits, you must be aggressive in your approach to investing. A growth fund or even an international growth fund will probably be your best bet. Funds like this rely heavily on investing in stocks that are “hot” and show a potential for great rewards. Unfortunately, the risks associated with these types of funds can be great too. If you’re going to invest for the long term and you can afford this type of fund financially, then this may be the right fund for you. Over the long term your fund may fluctuate and experience some losses, so make sure you can afford it.
Not looking to take that kind of risk but still want to see lots of capital growth and profits? Then maybe you should look at specialty growth funds, sector growth funds, or even international mutual funds. These focus on long term success through common stocks and although there is still an element of high risk, it’s not as risky as the previous growth funds.
If you just want to create an income through your investment, then you might want to look at growth and income mutual funds. Again, there is still a moderate to high risk but it should provide good dividends and show appreciation since this type of fund invests in common stocks that appear to be stable and profitable.
Capital appreciation isn’t important to you but creating a large current income is? Then you may want to take a look at the fixed income and equity income mutual funds. The risk is low to moderate but the income potential is very high.
Whatever you chose, be sure to know your goals, what you can afford and how much you can risk. There’s no “sure thing” when it comes to investing so be sure to look at all your options, study the market and make an informed choice. If necessary, seek the advice of a professional.
