Should I Purchase Mutual Funds?

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Should I Purchase Mutual Funds?

ric dalberri, Founder, RetirementUSA.com

September, 2010

This is a great question. In order to answer it, you must understand what a mutual fund is and the pros and cons to owning them.

Pros:

* If you are not a savvy investor and don’t have time or resources to give learning the ins and outs of this type of investment, then this may be the way for you to invest.

* Managers and analysts wake up each day to do what they know best, investing in equities (stocks and bonds). Keep in mind that the managers earn their (big bucks) income from the performance of the fund.

* A mutual fund comes in a variety of types and styles of investing. For example, there are stocks, bonds, sectors, money markets, moral issues, target dated, balance and asset allocation.

* This investment can be in a IRA.

* Should I purchase this investment in my retirement? You can get started with a low investment, such as only $1,000. You can systematically invest and have gains automatically reinvested.

* These investments are liquid in that, it only takes 1-3 days to receive your money.

* This type of investment pool monies from many individual investors which is an advantage in resources for the fund managers for purchasing power.

Cons:

* Mutual fund managers buy and sell what’s in the funds. If the fund (hopefully) makes money, you may receive capital gains distribution which can be reinvested. You will be taxed on this.

* Past performance is not indicative of future performance.

* Mutuals do have sales charges, fees and expenses

* This investment is not guaranteed or insured by FDIC.

* Mutual funds are sold at end of day (usually 4 p.m.) regardless of the time of day you place the sell order.

There is a lot of information to know about. There are A,B and C shares. There are load and no load investments. There are break points.

As always, asking, should I purchase mutual funds, you should consult a Financial Advisor who is qualified. Be sure to see and ask for their credentials.

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