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Mutual Fund Investing                                                 

 Using mutual funds in your portfolio 

If you want to invest in the stock market but don’t have a large enough portfolio to achieve the diversity you want through individual stock purchases, mutual funds may provide the solution you are looking for.

Mutual funds are a collection of stocks designed to meet a stated investment objective or strategy. For instance, you may be able to choose between a fund that holds small- or mid-sized companies, large blue chip companies, or government bonds. Some funds are designed to provide growth, others to give you income.

Fully diversified mutual funds can offer you access to more than 50 individual stocks or bonds. Achieving a similarly diversified portfolio by purchasing individual stocks is more difficult and costly. The trading costs for buying and selling stocks can quickly eat away a smaller portfolio’s value. This is less of a problem if you have a larger sum of money to invest.

 Understanding the risks

Mutual funds provide a stated objective or strategy, giving you some understanding of the level of risk and the potential for return. You can get an understanding of the fund’s objective and past performance by reading its prospectus. But a fund’s stated objective may not tell you the whole story.

Many funds have a great deal of latitude in which stocks they may actually buy. Therefore, even if you own shares of six different funds, each supposedly invested under a different type of overall objective, you may not be as diversified as you think. Each of the six funds may hold shares of the same stock. This would increase your vulnerability to market corrections, even though you may not be aware of the risk.

A mutual fund’s performance depends in large part on its portfolio manager. So, what happens if the fund’s manager changes his or her strategy during the investment period or the fund changes managers? Having an investment advisor who meets regularly with the fund’s manager to determine his or her strategies and meets with the fund company to determine its policies for hiring and maintaining quality portfolio managers can help you minimize this risk.

 Reading a mutual fund prospectus

A mutual fund prospectus should outline these six factors that allow you to evaluate the fund and its potential place in your plan.

  1. Investment objective. Is the fund seeking to make money over the long term or to provide investors with cash each month? You’ll find the answers in this section of the prospectus.

  2. Strategy. This section should spell out the types of stocks, bonds or other securities the fund plans to invest in. It may look for small, fast-growing firms or large, well-established companies. If it’s a bond fund, it may hold corporate bonds or foreign debt. This section may also mention any restrictions on what the fund can invest in.

  3. Risks. The prospectus should explain the risks associated with the fund. For instance, a fund that invests in emerging markets will be riskier than one investing in the United States or other developed countries. A bond fund should also discuss the credit quality of the bonds it holds and how a change in interest rates may affect those holdings.

  4. Expenses. Different funds have different sales charges and other fees. The prospectus will spell out those fees so you can compare them with the fees of other funds. It should also explain the percentage of the fund’s return that is deducted each year to pay for management fees and operation costs.

  5. Management. This section may do nothing more than list the fund manager or managers, or it may give specific information about the management team’s experience. If the prospectus doesn’t contain enough detail, you may be able to find this information in the fund’s annual report. 

    Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary therefore, the information should be relied upon when coordinated with individual professional advice. 

 Locating a mutual fund

To assist you in locating a mutual fund for your portfolio:

The information contained herein is for information purposes only and does not constitute a solicitation or an offer to buy or sell any securities. The company offers a comprehensive array of financial services. For more information on any product or service under consideration, request more information, literature, or prospectus which contains information on product objectives, sales charges, and product risk.

 Purchasing a mutual fund

A trained Aviate Financial financial representative is available to assist you in purchasing a Mutual Fund that meets your Investment Goals. Please contact TWS to work with a professional who will help you find a fund for your portfolio. All links are third party and you can request a prospectus by calling Aviate Financial or the Mutual Fund Family Directly.

With access to over 200 Mutual Fund families and more than 6000 separate fund options, you can efficiently consolidate your mutual fund investment activity. Most offer 401k services and other cash management options. Some of the funds in our participating fund families include:

 Mutual funds families available at Aviate Financial
ABN AMRO Mutual Fund
AEGON Mutual Fund AIG
Global Investment Group Mutual Fund