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Mutual Funds

As the stock market makes a significant recovery, you begin to feel you should be participating. If you have ever thought of getting into the market, a mutual fund is probably a good place to start. The great appeal of mutual funds is that the investor shoulders none of the investment decisions, timing decisions or execution steps required by individual stock investing.


A mutual fund is a professionally managed diversified portfolio of stocks and bonds or a combination of both. Mutual fund portfolio managers are trained in finance and have years of experience managing portfolios.

Many funds have in-house analysts and research staffs to review financial and economic data and to select securities that represent the best values for capital appreciation or income.


A diversified portfolio of stocks or bonds helps reduce risk, but does not assure against market loss. Financial research has shown that over half of the time a stock’s price moves in tandem with the overall market. That movement represents market risk. Twenty to thirty percent of the time a security’s price is determined by specific information about a company and/or its industry’s outlook. Luck is the final factor that can influence a stock’s price.

Portfolio managers have little control over market risk or the vagaries of the financial markets. If the stock market is moving higher, portfolios will generally register gains.

Diversification, however, will help protect investors against non-market risk. Most well-diversified mutual funds with asset values of more than $200 million hold from 50 to several hundred different issues.

As a result, by holding a large number of issues and maintaining a portfolio that tracks the broad market, a few poorly performing issues should not hurt the overall performance of the fund. This could be disastrous if you, as an investor purchasing individual shares of stock, held just one or two securities personally, and they were the ones that went down while the market rose.

Family Selection

The majority of investment companies have a group of mutual funds with different investment objectives from which to choose. Over the past 20 years, the number of mutual funds to choose from has increased dramatically.

Generally, investors have the option to switch out of their existing funds into other funds within the same family of funds, as their financial needs or investment conditions change.

Reduced Expenses

In addition, mutual funds represent a low cost way to invest in the financial markets. Management fees for running the portfolio can be .5% or less, depending on the total assets of the fund. Many funds can be purchased with no-load or sales charge. Mutual Funds are sold by a prospectus which contains complete information, including all charges and expenses. Read it carefully before investing any money. A prospectus can be obtained from your Financial Advisor.

Performance and Results

Fund performance can be tracked easily and historic information is readily available. Investors shouldn’t expect to get rich quickly from mutual fund investments.

During the last five years, we have encountered an unusual boom in stock and bond prices. Long-term planning is the key and, as with other investments, patience is a virtue.

Key Benefits

  • Professional Selection
  • Reduced risk through diversification
  • Ongoing management

Investing in mutual funds involve risk, including the possible loss of principal. Investments in specialized industry sectors have additional risks, which are outlined in the prospectus.

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