Mutual funds offer many advantages that are particularly attractive if you have less than $25,000 to invest, or if you don't have the time, experience, or inclination to manage your own investment portfolio. If you invest in an actively managed mutual fund, you get the benefit of the fund manager's professional expertise without the expense of hiring your own investment advisor (although you'll pay mutual fund fees and expenses).
Money invested in a mutual fund is fairly liquid. With some qualifications, you can generally sell your shares back to the issuer at any time if you need cash. Also, the typical mutual fund holds dozens and often hundreds of different securities. If you purchase shares of a mutual fund, you benefit from instant diversification at a relatively low cost. For instance, if you buy into an asset allocation fund, your investment dollars will automatically be spread across multiple asset categories, even if you invest only a few hundred dollars. Even with a mutual fund that invests in only one type of investment, you still have a small stake in many different securities. It would require a much larger initial outlay of cash to purchase a portfolio of individual securities as diverse as most mutual funds. Remember, though, that diversification doesn't guarantee a profit or ensure against a loss.
Note: Before investing in a mutual fund, carefully consider its investment objectives, risks, fees, and expenses, which are included in the prospectus available from the fund. Read it carefully before investing.
However, investing in individual securities also has its advantages. You can time the purchase and sale of securities to minimize the tax consequences. You can hold securities long enough to avoid short-term capital gains treatment and realize your losses at a time when you are in the best position to claim them as a deduction. As a mutual fund investor, you give up that control--fund managers do not consult with shareholders before making transactions. Finally, although you may spend more time and money building a portfolio of individual securities, you'll be able to customize your portfolio so that it truly serves your needs. You can invest only in companies you are comfortable investing in, with the level of diversification you desire and degree of risk you're willing to take.
Whether you’re new to investing or already have some investments, you likely have questions. It’s a good idea to meet with a professional and discuss your goals for investing. Connect with a Farm Bureau agent to learn more about options available that can help you reach your financial goals.
RBC Wealth Management, a division of RBC Capital Markets, LLC, Member NYSE/FINRA/SIPC. © 2017 All rights reserved.
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Agent must be a registered representative of FBL Marketing Services, LLC to discuss mutual funds. Individual securities are not offered through FBL Marketing Services, LLC. Investors should consider the investment objectives, risks, and charges and expenses of a fund carefully before investing. Prospectuses containing this and other information about the fund are available by contacting your Registered Representative. Please read the prospectuses carefully before investing to make sure the fund is appropriate for your goals and risk tolerance.
RBC Correspondent Services+, a division of RBC Capital Markets, LLC, Member NYSE/FINRA/SIPC, provides clearing and execution services for FBL Marketing Services, LLC. The referenced product and/or service is made available through that relationship.