One of the most popular investment vehicles available today is a mutual
fund. Mutual funds are the vehicle of choice for many individual IRAs,
401(k)s, Profit Sharing Plans, Simple IRAs, as well as others. More
than likely, many of the readers have their own mutual fund or know of
someone who has money invested in a mutual fund or portfolio of funds.
However, with more than 17,000 mutual funds available today, how do
your know if yours is right for you? First, it is critical that you
determine the suitability of your particular fund with your risk
tolerance, investment objectives and priorities. It is important to
take note of your investment experience and whether or not your current
mutual fund(s) are out of character for you. If you are having trouble
sleeping at night and worry often about the risk of losing your
investment capital, then an overly aggressive posture might not be
suitable. Upon recommending a fund to a client, investment advisors are
required to provide them with a prospectus. A prospectus spells out
many of the details regarding that particular investment. It is
strongly recommended that you read it before you invest and discuss any
questions with your advisor.
Mutual funds invest in varying types of investments. Funds that
buy only stocks or bonds or both are available for the picking. Some
funds buy international stocks, and there are others that buy only U.S.
stocks. Some look for small, medium and/or large company stocks with
growth potential as an emphasis. Others focus on stocks that pay
dividends and/or preserve capital. Mutual funds that look to buy
various types of bonds are also available. With more varieties
available than there is time to discuss, be sure your selection is
appropriate with your objectives.
Once you have chosen a fund and feel comfortable with your
selection, it is important to be sure your objectives are being met.
Meeting with your investment advisor regularly to discuss your
investment(s) and objectives is good practice and strongly recommended.
If material changes have occurred in your life, such as marriage, an
addition to the family, etc., be sure to make your advisor aware of the
changes. It is also good practice to review your mutual fund statements
once they arrive in the mail. Looking for discrepancies and reviewing
any changes can be beneficial in helping you to meet your investment
Mutual funds, as an investment vehicle, can be beneficial in
helping you to meet your investment objectives. However, taking the
time to do your own homework and reading through the prospectus can not
be emphasized enough. Educating yourself about your selection and being
aware of how it will help you to accomplish your goals can provide a
great comfort level and less uncertainty.
Aaron Archambo is a financial advisor and the vice president of Archambo Financial Advisors, Inc.
Securities Offered Through Dominion Investor Services, Inc. Member FINRA & SIPC.