Chapter 14 – Mutual Funds and Real Estate
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Why you should invest
Mutual FundsDiversification, professional management, small initial
investmentsMany categories of funds to choose from
Real EstateLong-term stability and growth in valueA hedge against inflation but can be difficult to sell -
illiquidity
Mutual Funds Mutual Funds When it comes to making investment decisions, investors always have a choice. They can do it on their own, or
they can hire a professional to make their money management choices for them. Investors who want professional management turn to mutual funds.
A mutual fund pools money from several investors and uses the money to buy a particular type of investment, such as stocks. A fund manager, who is an investment expert, makes all of the buy and sell decisions for the investments in the fund. Because mutual funds own a variety of investments, investors enjoy the benefits of diversification, which we discussed earlier. For these and other reasons, mutual funds can be a great choice for investing.
Mutual funds are created for several different purposes or objectives. Some are designed to produce income and invest in bonds, CDs, and other income-producing items. Some are designed for growth and invest in stocks or real estate.
Mutual funds invest in almost any area of the business world. If you can imagine it, there is probably a fund in existence that specializes in a particular type of business or product. There are funds that invest in technology, in food and agriculture, in government bonds, in foreign counties, in energy, and even in gold or other precious metals. So if you have a particular interest in a product or service and you want to invest in the companies in that industry,
you can do so easily by hiring a professional money manager and investing in a mutual fund.
Types of Mutual Funds Growth Funds
Invests in the common stock of smaller companies that have a greater potential to grow
Income Funds Invests in the common stock of established companies and
industries. Specializes in income-producing securities which consistently
pay good dividends Balanced Funds
Invests in a mixture of stocks (preferred and common).
Types of Mutual Funds
Global FundsPurchases international stocks and bonds as well as
U.S. securities Index Funds
Holds stocks that react the same as the stock markets as a whole do
Types of Real Estate
Vacant Land Single Family Homes Duplexes and Apartments Recreation and Retirement Property