While all mutual funds generally work the same with an adviser managing underlying investments, mutual funds can have very different objectives and can vary in risk, diversification and types of underlying investments. For more information on the different types of growth mutual funds and how they compare to each other, read this Investment Strategy.
A management company is an investment company that manages a portfolio of securities for its shareholders. Mutual funds fall into this category. Management companies are divided into two categories: open-end or closed-end.
Invariably, when markets are volatile, and it seems as if no single investment strategy is keeping up with the market indexes, we get questions from clients asking whether an index fund would be a preferable investment.
We generally recommend that if an investor has less than $50,000 to invest in the market, mutual funds should be purchased to take advantage of the instant diversification. If more than $50,000 can be invested in the market (following our Ten Year Rule), shares of individual common stocks, in different industries, should be purchased.
An option is a securities contract that allows the holder to buy or sell a fixed amount of shares of stock (or indexes and commodities) at a specified price within a limited time period. If the option is not exercised during the specified period, the option expires. Most options usually expire within a year; however, some may not expire for as long as three years.
Series EE bonds are Savings bonds are issued by the United States Treasury Department, and are reliable, low-risk products that you can use toward financing education.
Many new investors look for a way to invest a small amount of cash into the stock market without paying huge commissions. To meet this increasing demand, more companies are offering dividend reinvestment plans, also known as DRIPs. DRIPs are offered by a corporation and allow investors to reinvest their cash dividends by purchasing additional shares or fractional shares of some of the most well known publicly-traded companies for as little as $10 at a time. As a result, DRIPs have become heavily promoted as viable solutions to new investors entering the stock market
Many sectors are negatively correlated, so by diversifying your portfolio you may be able to better weather a market downturn.
Every investor needs to know investing in the stock market requires a thorough understanding of the risks involved. With any investment there is a risk-return trade off based on a degree of uncertainty—the greater the risk, the greater the potential for return if that risk pays off.
When an investor purchases securities, the securities may be paid in full, or part of the purchase price can be borrowed from a brokerage firm. If funds are borrowed, an investor is trading “on margin.” In order to trade on margin, an investor must open a margin account.
