Home
| Work & Business
| Investments & Stocks
| Money Market Funds
| How to Invest Money in Market Mutual Funds
How to Invest Money in Market Mutual Funds
by Dave Guilford
-
Overview
Mutual fund investing is one of the simplest and most effective ways for new investors to begin saving for retirement, college tuition or any number of other investment goals. By taking advantage of the professional money management that mutual funds offer, individual investors don't have to become an expert on the market in order to take advantage of the long-term growth historically associated with stock investing. Whether avoiding sales charges by purchasing a no-load mutual fund--or taking advantage of a broker's expertise and buying a loaded fund--mutual funds are a part of the vast majority of investors' portfolios.
-
-
Step 1
Decide how much to invest. Depending upon your age and investment goals, determine how much of your savings you want to put at risk in the hopes of achieving a better return than a bank savings account. Mutual funds are one of the more conservative investments available, but they can still lose money. It is important to know how much you are willing to risk before you get started.
-
Step 2
Do your research. There are dozens of magazines and hundreds of Internet Websites devoted to mutual fund research. There is so much information available, it can become overwhelming. Perhaps the best magazine for mutual fund investing is "Money Magazine." Also, Morningstar has been the gold standard of mutual fund ranking services for over 20 years.
-
Step 3
Contact the funds of your choice. Once you've narrowed it down to five or six funds you like, call them and request a prospectus and application. The prospectus will disclose everything about the fund, from what the fund invests in to how much all the management and ancillary fees are. It may be a good idea to purchase more than one fund when you decide which funds best meet your investment goals.
-
Step 4
Apply to the fund. Fill out the application for the fund or funds of your choice. The application will include all of your personal information, including tax information, and whether your account will be a designated retirement (IRA) account. Send the application in with a check made out to the mutual fund company for the amount you wish to invest.
-
Step 5
Make regular periodic investments. Set a schedule to invest more in the fund. By investing a set amount on a predetermined basis, you take advantage of dollar cost averaging. This means when the fund is down, you buy a greater number of shares with the same amount of money so that you make more when the fund goes up later.
- 2
- Some funds practice very risky trading strategies or focus on out-of-favor sectors of the market. It is not unheard of for a mutual fund to lose 40% of its value or more in a given year.
- Some funds practice very risky trading strategies or focus on out-of-favor sectors of the market. It is not unheard of for a mutual fund to lose 40% of its value or more in a given year.
