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(NewsNation) — Time is money, and money is investable.
One investment strategy is to purchase a mutual fund.
What is a mutual fund?
A mutual fund is an investment strategy in which you pool your money with that of other investors to buy stocks, bonds and other securities, according to Fidelity Investments.
Investors who purchase a mutual fund own part of the fund’s assets. If you sell a security the mutual fund invests in at a higher price than what you originally paid, you make a profit, called a net capital gain.
You can also earn money from mutual funds when a security pays interest or dividends. A security is a broad term for assets that hold monetary value.
How to invest in a mutual fund
To invest in a mutual fund, you must first set up an online brokerage account. Common financial service companies that manage these accounts include Fidelity Investments, Vanguard, Charles Schwab and Ally Invest.
Then, you’ll need to deposit money into your account to be able to purchase a mutual fund.
Research the funds to ensure they align with your goals, considering the fund’s performance and risks.
Track your portfolio and adjust your strategy as needed.
Top tips for investing in a mutual fund
- Does the mutual fund align with my long-term financial goals? During the research stage, identify your goals and ask yourself if what you’re about to invest in makes sense for you. Experts at Bankrate suggest beginners invest in a low-cost S&P 500 index fund.
- What is this fund’s long-term performance? You’re investing because you want to gain in the long run. Take the fund’s past performance into account to help determine whether its success will continue.
- What are the fees associated with buying a share in a fund? “Remember that if two funds have the same investment performance, the one with the lower fees will leave their investors better off,” Bankrate said.
- Don’t forget about tax season. “Consider the fund’s tax-efficiency and whether you’re going to hold it in a tax-advantaged account — like your 401(k) — or not,” according to Charles Schwab, a financial services company.
