Mutual fund managers can buy stocks, bonds, or a mixture of the two. They may invest in local or foreign stocks, they may invest in well-known and famous companies like IBM or Microsoft, or they may focus on stocks of small companies that no one has heard of.
They can invest in high-priced, fast-growing stocks, or they can buy low-priced stocks with lower expectations for growth. Finally, the portfolio can be made up of 20 shares, which does not make it smaller, or it can be made up of 200. The important thing is to know how it is composed, remember that the investment portfolio that the mutual fund has and what its managers buy affects the return on your money!
The big reason many investors invest in Mutual Funds is because of asset diversification. Even if you have money, it is very difficult to hold and buy shares in 20 companies, however, that is the role of the Mutual Fund! A Mutual Fund must be diversified, although not extremely since the returns are diluted in so many actions, but it cannot be invested in a single instrument, since all the money in the Fund would depend on it.
Investing is not free, much less in a Mutual Fund. It is necessary to hire expert professionals in the area of money management, BackOffice staff, stationery, facilities, etc. But, spending huge amounts of money investing is almost the same as throwing away or wasting your money. Consider that every penny you or your manager spends on fund fees or expenses is one penny less return on your investment!
The expenses when investing in mutual funds, however, are practically constant over time, what changes is the value of the components that make up the fund and therefore its performance. It is impossible for you to control market fluctuations, but it is possible for you to control what you spend on investing in Mutual Funds.
Some Mutual Funds charge you commissions for entering or leaving it, others charge you a penalty for withdrawing your money before a certain time (Generally they range from 1 to 4 years), others an annual administration commission, etc. In some cases, many of the Mutual Fund costs or expenses appear within the Fund's reports, such as balance sheets or account statements. It is necessary that you find and identify what those expenses and costs are, if they begin to be very high it is necessary that you reconsider your investment in said Mutual Fund. Remember that you will not always earn the most desired return by investing in a Mutual Fund, but you will always pay the expenses and fees incurred!
Mutual Funds are only as good as the people who run them. They are the ones who decide what to buy or what to sell, how much, when and how. Because of this it is important for your money and especially for you to know who or who they are. Be aware of who is the person responsible for the mutual fund, remember that it is that person who manages your money, find out who are the most sought-after administrators. Stay up-to-date on when a manager is rotated to another mutual fund and follow up on this person when he or she breaks a record. They may change the manager of a fund and it no longer performs the same. By the time you find out, the news may not be a very good surprise!
