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Mutual Fund Review
Savings means putting something aside for something such as college. You can save money in the bank, invest in a pension plan, or put your money in a mutual fund. There are many types of mutual funds such as a balanced mutual fund that allocates its investments between both stocks and bonds, or international funds. These are funds that invest in companies located outside of the United States. Global funds invest in funds all over the world. Bond funds invest in bonds, which are IOU’s issued by businesses and governments when they borrow money for more than one year.
The two funds that I chose for my college are money market mutual funds and bond funds. I chose these because I think they will help me before, during, and after college. Bond funds are the alternative of stock funds. The borrowers must pay a periodic interest on the bonds they sell to consumers; therefore, they have a big part of the money you make back on your investment. Bonds generally promise to give investors their principal investment back. This makes them less risky as an investment and will protect some of my college savings.
Money market mutual funds are a route for investors looking for a place to put their money for a short period of time. These funds invest in a very short-term IOU’s like Treasury bills and other debts that will be repaid within a few weeks or months. These funds try to keep the value of their shares at $1, so the shares of these funds do not have the sharp ups and downs of bond and stock funds. This reduces the risk of losing money. This is why investors use them for “safe parking” of their money for short periods of time. Money market funds, stock funds, and bond funds offer alternative ways to invest with different risks and potential returns. A fund’ s return depends on its share price, or net asset value. All funds have yearly management expenses that vary from fund to fund. These expenses reduce net asset value, and can affect a fund’s total value. In addition, a fund may also pay out some of its income as dividends to shareholders. These payments reduce a fund’s investments, so they can shrink its net asset value.
I believe that these are the best funds for my savings for college. The money market mutual fund could help me because I can invest in very short-term investments. The bond funds have less risk because businesses and governments issue them. It has taught me a way to save my money, not to spend all of it, and to use it wisely. Investing in two different types of funds will help me save for my college education.
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