In Units 4 and 5 you learned how to purchase individual securities such as stocks and bonds. Another popular investment choice is mutual funds. Mutual funds are an investment through which many people invest in stocks and bonds indirectly.
Almost everyone who is investing has a need to learn the basics of mutual funds. Some investors might need to know how to choose investments for a 401(k) or other retirement plan; others, how to invest money received from an insurance or divorce settlement. Many people just want to know how to get started as an investor using mutual funds. Still others own a hodge-podge of funds bought at various times without much thought as to how they complement each other. Getting a year-end bonus, a tax refund, or reading that a popular mutual fund is about to close also prompt many would-be investors to buy a fund.
An individual's investment portfolio should be more than just a collection of mutual funds. Before you select funds to invest in, you will want to determine your investment goals, your time-frame for needing the money, and the amount of risk you are willing to take. This unit will help you learn how to invest in mutual funds within the context of your own overall financial plan. One of the top reasons for learning about mutual funds is that you can save money if you choose the funds and maintain your portfolio yourself.
Work on the Action Steps now to get started.