7 Steps of Investing Basics – Step 6 Mutual Fund & ETF Investing

William Blanken - 157 Views

Step 6 – Investing Through Mutual Funds and ETFs

Presented by William Edward Blanken Jr

 

You can invest in all three major asset classes through mutual funds, which pool your money with that of other investors. Each fund’s manager selects specific securities to buy based on a stated investment strategy.

Mutual funds offer two key benefits. Because most mutual funds own dozens or hundreds of securities, you achieve greater diversification than buying a few individual securities on your own. Also, the fund manager’s expertise is part of what you pay for in buying mutual fund shares.

A mutual fund may invest in one of the three major asset classes, or combine them. For example, a balanced fund typically includes stocks and bonds. With an actively managed mutual fund, the fund manager buys and sells specific securities, trying to beat a benchmark index such as the S&P 500. A passively managed or index fund tries to match the return of a specific index by holding only the securities included in that index.

Note:  Before investing in a mutual fund or ETF, carefully consider its investment objectives, risks, fees and expenses, which can be found in the prospectus available from the fund. Read it carefully before investing.

Like index funds, exchange traded funds (ETFs) typically invest in a group of securities represented in a specific index, and the way they’re organized means that expenses typically are lower than those of actively managed mutual funds. But you must pay a brokerage commission whenever you buy or sell ETFs, so your overall costs could be higher, especially if you trade frequently.

Note:  Mutual funds and ETFs are subject to market fluctuation, risk, and loss of principal. When sold, investments may be worth more or less than their original cost.

Advantages
  • Professional money management
  • Small investment amounts
  • Diversification
  • Liquidity
Tradeoffs
  • Fluctuating share values
  • Some money kept in cash for fund liquidity needs
  • Potential tax inefficiency
  • Mutual fund fees and expenses

 

BLANKEN MANAGEMENT INC DISCLOSURES

The investment advice provided along with the strategies suggested by Blanken Management will vary depending on each client’s specific financial situation and goals. There are risks involved while investing in securities. Considering the risks, you should fully understand the nature of the contractual relationship into which you are entering and the extent of your exposure to risk. Certain investing strategies may not be suitable for many members of the public. You should carefully consider whether the strategies employed will be appropriate for you considering your experience, objectives, financial resources, and other relevant circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

This communication is strictly intended for individuals residing in the state(s) of FL. No offers may be made or accepted from any resident outside the specific states referenced.

Prepared by Broadridge Advisor Solutions Copyright 2020.

 

 


Leave a Reply

Required fields are marked *