Online Mutual Funds Trading is all about a group of investors operating through a fund manager to purchase a diverse portfolio of stocks or bonds. Instead of trading shares of corporations, you trade a group of shares in portfolios. These portfolios will make your gain or loss depends on many corporations shares, some portfolios might have shares of a competitive corporation in the same field.
Mutual Fund Cost
From it’s definition you can estimate that it’s one of the most expensive online investment. If you don’t mean to invest a big money, I advise you to look for another type of trading where they offer mini accounts allows you to start trading with $100’s instead of $1000’s.
Whichever mutual fund you ultimately wind up using, it is important to stay diversified. Having some money in long-term funds and stocks, with some in money-market funds and bonds, is always a smart way to plan for the future and any bumps that may occur in the market.
The advantages of mutual funds are pro managing, diversification, simple, economies of scale and liquidity. The disadvantages of mutual fund are high costs, over-diversification, possible tax consequences, and the inability of management to guarantee a superior return.
Online Mutual Funds Trading Types
Money Market Funds The market consists of short-term debt instruments, mostly Treasury bills. This is a safe place to park your money. You won’t get great returns, but you won’t have to worry about losing your principal.
Bond/Income Funds The purpose of income funds is to provide current income on a steady basis. When referring to mutual funds, the terms “fixed-income,” “bond,” and “income” are synonymous.
Balanced Funds The purpose of it is to provide a balanced mixture of safety, income, and capital appreciation. The strategy of balanced funds is to invest in a combination of fixed income and equities.
Equity Funds Funds that invest in stocks represent the largest category of mutual funds. Generally, the investment objective of this class of funds is long-term capital growth with some income.
Global/International Funds An international fund (or foreign fund) invests only outside your home country. Global funds invest anywhere around the world, including your home country.
Specialty Funds Mutual funds in general might consist shares from different categories but specialty fund concentrate on a certain segment of the economy.
Index Funds replicates the performance of a broad market index such as the S&P 500 or Dow Jones Industrial Average (DJIA). An investor in an index fund figures that most managers can’t beat the market. An index fund merely replicates the market return and benefits investors in the form of low fees.
Buying and Selling, Online Mutual Funds Trading
You can buy some mutual funds (no-load) by contacting the fund companies directly. Others sold through brokers, banks, financial planners, or insurance agents. If you buy through a third party there is a good chance they’ll hit you with a sales charge (load) and you can do that online.