| Mutual funds are a group of stocks, which is | | | | that they often fall under several categories. For |
| managed by a professional. That professional uses | | | | example, a person who wanted to invest in the |
| the money from many different people to | | | | technology sector could find a mutual fund that |
| purchase stocks from various companies. This | | | | buys stocks from only technology companies. |
| way, the people are not as affected by a drop in | | | | Other popular categories include environmentally |
| price by an individual company. | | | | friendly companies, pharmaceutical companies, and |
| An analogy would be ordering desserts with a | | | | biotechnology companies. |
| group of your friends. If everyone orders a | | | | The most popular mutual fund is probably the |
| different dessert and shares, then everyone can | | | | S&P 500, which is a group of 500 companies |
| have a taste of many different things. | | | | which tends to follow the same trend as the |
| Likewise, a mutual fund allows an individual to own | | | | stock market as a whole. |
| shares of many different companies' stocks | | | | Even though mutual funds present an easier way |
| without such heavy investment. | | | | to invest than investing in individual stocks, an |
| Mutual funds are attractive to beginning investors | | | | investor should still periodically check their mutual |
| because they are relatively easy to understand. | | | | fund to make sure that it is performing the way |
| They are managed by a professional, so they | | | | that they like it to. Many people make the |
| don't require as much research by the individual | | | | mistake of not reviewing their mutual funds only |
| investor. It offers a chance to "play the market" | | | | to find out too late that they have been losing |
| without taking the risks that would come with | | | | money. Also, which investing in a mutual fund |
| owning stock in individual companies. For example, | | | | does present a way to diversify your |
| if a person owned stock in one company that | | | | investments, you should also diversify the mutual |
| suddenly dropped, that person would be out a lot | | | | funds that you are investing in for greater |
| of money. But if it was part of a mutual fund, | | | | diversification. |
| then the loss might be balanced out by other | | | | All in all, mutual funds are a great investment to |
| stocks in the fund that made gains. | | | | have in your portfolio. |
| Another attractive thing about mutual funds is | | | | |