Even if you don’t really understand stocks and bonds and the markets they trade in, you and other beginners can make money buying mutual funds once you receive a handle on the mutual funds universe. Here we take the mystery out of investing for beginners.
News flash: Tens of millions of Americans make money buying mutual funds without knowing what they are doing. Caution: In addition they lose money unnecessarily and they are not investing as beginners, because they’ve been carrying it out for years. Let’s look at what you really need to know to make money investing on a more consistent basis while avoiding serious losses.
Mutual funds were created and promoted as the common investor’s vehicle for investing money in stocks and bonds. That’s just what กองทุนรวมกรุงไทย they are – packages of investments managed for investors by professional money managers. They make investing for beginners simple. You merely open an account, and put your cash down with instructions regarding just how much to invest in which funds. Example: You send in $10,000 to get shares of ABC Stock Fund. Soon you will own shares because fund and will own a really small section of a very large portfolio of stocks. The number of shares you will own will depend on the share price during the time your purchase order is processed.
Whether or not you make money buying mutual funds without taking much risk depends where funds you invest money in and how you go about it. You can find basically three traditional fund alternatives: stock (diversified), bond, and money market funds. You ought to invest in ALL THREE TYPES if your goal would be to consistently make money buying mutual funds. In addition, you need to understand asset allocation, in order to tailor your total mutual fund portfolio to suit your risk profile. And remember, investing for beginners need not be difficult.
Diversified stock funds will be the riskiest of the three and they are your growth engine for earning higher returns. They invest your money in a broad spectral range of stocks representing numerous different industries. This makes investing for beginners simple compared to picking your own personal stocks. You make money investing here primarily through price appreciation (the fund share price going up) and through dividends. The major risk: share prices fluctuate and can fall significantly when the stock market falls. Twelve months you possibly can make 20%, 30% or even more; and you can even lose that much. Over the future, investors have averaged about 10% a year. Notice I said LONG TERM.
Bond funds invest your money in bonds, which are debt securities that pay interest. Their primary objective isn’t growth, but alternatively to earn higher interest for investors than they might earn from safe investments like bank CDs. Traditionally, you make money buying these mutual funds primarily through the dividends they pay you from the interest they earn. Normally they pay considerably higher dividends than stock funds do, but just like stock funds their share price fluctuates (usually much less). You can make money from higher share prices, but you can even lose money here. They’re considered to be safer investments than stock funds, but bond funds are not necessarily safe investments.
Money market funds invest your money in high-quality short-term debt instruments (IOUs) and pay current interest rates in the shape of dividends. Unlike another two mutual funds, their share price is pegged at $1 and does not fluctuate by design. As interest rates increase the dividend increases, and as rates fall so does the dividend. You make money buying these mutual funds only through the dividends paid. These mutual funds are considered to be safe investments, and can be used as a cash reserve awaiting bigger opportunities.
To make money buying mutual funds without worrying your head off you should invest in all three to really have a balanced investment portfolio. Here is what I am talking about by balance and why it is so vital that you investing for beginners. Holding either stock or bond funds involves the chance of losing money. In the event that you invest in both this can decrease your overall risk. Reason: oftentimes losses in a single are offset by gains in the other. Money market funds add flexibility and a pillow of risk to your general portfolio of mutual funds. The more safety you would like the more you allocate to money market funds.
A good example of investing for beginners follows. You invest $10,000 equally allocated to the three basic fund types. A few years later you see that the stock fund is worth a lot more compared to the other two. The good thing is that stocks performed very well. The bad news is a major decline in stock prices could get rid of your profits and more. To keep things in balance, rebalance one per year so you are back to equal amounts in each fund. This is very important if you intend to make money buying mutual funds on a regular basis without unpleasant surprises every few years.
Investing for beginners isn’t about getting rich quick and neither are mutual funds. If you intend to grow your cash for a long term goal (like retirement) this information was written for you. You may make money buying mutual funds without much effort or worry once you receive a handle on the basics.