Four Benefits of Mutual Funds
An estimated 54
million U.S. households owned mutual funds in mid 2002.1
That’s roughly one out of every two households in the country.
Considering several years of lackluster stock market performance, it’s interesting
that the number of households owning mutual funds was down by only
about two million from 2001, which was the highest year on record.2
Why have most mutual fund investors stayed the course during this
volatile period? Perhaps it’s because they appreciate the advantages
that mutual funds have to offer.
A mutual fund is run by an investment company that pools money from
investors to buy a portfolio of securities.3
Actively managed funds employ professional investment advisors who
research, select, and supervise fund assets, buying and selling
in an attempt to generate investment returns that meet the fund’s
diversification is a touchstone of a sound financial strategy. Spreading
risk across a range of assets has the potential to offset losses
from some securities with gains in others. Mutual funds can offer
an economical way to achieve diversification in a portfolio because
they generally include dozens or hundreds of different securities,
a level that would be hard for average investors to achieve on their
fund shares that are held outside of a tax-advantaged retirement
plan typically offer high liquidity. Of course, it’s wise to invest
for the long term; but if the need arises, mutual fund shares can
typically be converted to cash on short notice, generally without
There are thousands of mutual funds to choose from that differ on
the basis of investment objectives and underlying securities. Whether
you are pursuing growth or income, or your goals are aggressive
or conservative, there is probably a mutual fund that is appropriate
for your situation.
Even during times of volatile market activity, mutual fund shareholders
have demonstrated loyalty to this investment vehicle. Taking advantage
of the many benefits that mutual funds offer may help you reach
your financial goals.
1 & 2Investment Company Institute, 2002
3There are fees and expenses associated with investing in mutual
funds, including portfolio management fees and expenses and sales
charges. Mutual funds are sold by prospectus only. Be sure to read
the prospectus carefully before deciding whether to invest.
4 Diversification does not guarantee against loss; it is a method
used to help manage investment risk.