Mutual funds are collections of capital from different investors with the purpose of realizing growth through investments. Investment areas include money market funds, bonds, stocks, and U.S. government securities.  Skilled professionals, called mutual fund managers, typically select the investments according to their research, area of expertise, and/or level of intended risk.

So what are some mutual fund positives?

1. A specialized individual follows the investments (so you don’t have to).
2. Not a lot of money is needed to get into some funds.
3. Funds are usually diversified (meaning investments are spread across different companies or areas).
4. Funds are generally easy to get out of should the investment be needed.

With positives, though, usually come some negatives.  Here are a few.

1. Money managers have control, so once an individual chooses a fund, he or she has little say as to where the money is going.
2. Fees and/or sales charges sometimes accompany this type of investment.
3. Not all fund managers have the same skill level, so some are better than others.

Are all mutual funds the same?  No, there are different kinds.  A few fund types are listed below:

Growth Funds. These funds focus primarily on companies with the highest promise of upward mobility.

International Funds. This type invests in companies abroad in the hopes of producing growth.

Bond Funds. Often a safer type of fund (at least in the short term), bond funds invest in government, corporate, or municipal bonds.

Index Funds. This type focuses on specific stock indexes, such as the Dow Jones.

Money Market Funds. Although sometimes not producing the highest return rates, Money Market Funds tend to present the safest environment.

So you think you might be interested in a mutual fund?  Well, it is important to do your homework.  Research the fund’s history to better understand its record.  However, just because a fund has made impressive returns in the past year or two, it does not necessarily indicate it will repeat the stellar performance in the next two.

Another thought?  Access data from third-party companies, such as Morningstar, which analyze a medley of investments, mutual funds included.  Such businesses provide comprehensive information concerning market trends and how well specific investments have performed over time.

So, are mutual funds completely safe?  No, similar to other types of investments, they involve some degree of risk.  Nevertheless, they can also produce impressive gains.

Mutual funds are certainly not for everyone, but then again, what is?