Investing Basics

You may be convinced that when it comes to investing, starting early has its advantages. However, choosing which type of investment to begin with can be harder. For many new investors, mutual funds offer an affordable way to unlock the advantages of investing with a professional money manager for very little out of pocket cost.

A mutual fund is an investment vehicle owned by its shareholders. Investments in mutual funds are pooled with investments from other shareholders. The money is then invested in the securities market by an investment professional, known as a portfolio manager. Each mutual fund has a stated investment objective, such as providing current income or seeking capital appreciation. When you buy shares of a mutual fund, you own part of the fund’s portfolio. If the portfolio’s shares rise in value, you could sell your shares at a profit. If, on the other hand, the portfolio loses money, you could too.

In most cases, you can open a mutual fund account for as little as $1,000 and subsequent investments of $50 a month. Once you open an account, the fund’s distributor takes care of record keeping and tax reporting. Mutual funds typically offer ready liquidity: fund shares can usually be redeemed on any given business day

There are hundreds of mutual funds to choose from. Which ones are right for you? Here are some common investment categories. Lower-risk investments are at the bottom, higher risk at the top:

Staying Diverse

Of course, there’s more to investing than high-risk and low-risk. Asset classes perform differently over time. By spreading your money across a variety of investments, losses in one area can be offset by gains in another. Generally speaking, stocks are riskier than bonds, and large, American companies offer a safer investment return than the stocks of smaller companies or firms located overseas. Here are some common portfolio types and their allocations:

Common Portfolio Profiles

Get Help

You may not have the time or expertise to be your own portfolio manager. That’s part of the reason why millions of Americans rely on the services provided by a financial professional. A financial professional will monitor your investment results and adjust your strategy as your situation changes. Call 800-MAINSTAY (624-6782) to speak with one of our financial professionals.