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Boulder City Magazine® September 2008 Issue
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Money Matters
by Wendell Whitman
Edward Jones
Know Objectives Of Mutual Funds Before Investing
When you invest in mutual funds, it’s important to understand their objectives. For example, growth funds invest in the stocks of growing companies, with the goal of providing investors with capital appreciation. Growth funds carry the highest level of investment risk of all mutual funds.
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Other types of funds have different objectives. When you invest in a bond fund, you can receive current income, in the form of interest payments, and the chance to help stabilize a portfolio that may be heavily weighted toward stocks. Bond funds are subject to interest rate risk and fund values may decline as interest rates rise.
If you want to “park” some money for a short time before investing it elsewhere, you could choose money market funds. These funds invest in short-term debt instruments and are managed to maintain a stable net asset value of $1 per share. However, the value of the fund can fluctuate and it’s possible to lose money.
A financial advisor can help you select those mutual funds that are right for you. But before writing a check, read a fund’s prospectus which can be obtained from your financial advisor. The prospectus contains more complete information, including the funds investment objectives, risks, charges and expenses that should be carefully considered.
Don’t Get Burned By “Hot” Stocks
No matter what the season, you’ll need to protect yourself from a potential source of burns: “hot” stocks.
Why is it dangerous to chase after so-called hot stocks? For one thing, you may be getting a tip from an unreliable source, such as a well-meaning but poorly informed friend or co-worker. Also, by the time you discover a hot stock, it may already be cooling off.
But the biggest reason not to go after hot stocks is that they may be inappropriate for your individual needs.
Ultimately, it’s best to evaluate each stock on its own merits and prospects and on how it fits into your existing holdings. You may not find too many hot stocks this way, but you’ll help protect yourself from getting scorched.
Contact Wendell at Edward Jones www.edwardjones.com. |
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