For most people mutual funds are an excellent way to invest in the stock market. Not only is there a wide variety of funds but mutual funds also offer many other benefits
- Portfolio Management: When you purchase a fund, you are also purchasing the expertise of an experienced portfolio manager. You don't need to do research and continuously monitor your securities, they do it for you. This does not mean that you should not periodically monitor your funds performance. If they are not meeting your realistic expectations you might consider changing funds. If you are new to investing or don't want to continually monitor your portfolio, mutual funds might be the right investment for you.
- Diversification: When you purchase a mutual fund you actually own a small portion of all the stocks, bonds or other investments in the fund. Based on the type of fund this might be an investment in a single sector or across a broader market area.
- Small Minimums: The typical minimum investment is $2,500, although some funds will accept a minimum as low as $250 or $500. You can also continually add to your investment using a plan called dollar-cost averaging Stocks: Buying, Selling & Researching for an even greater long term accumulation.
- Ease of Purchasing and Selling Shares: You can purchase or sell mutual funds through a broker, bank, or online based on the net asset value, or NAV, (which is calculated at the end of each trading day), minus management expenses.