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If the market’s uncertainty has made you gun-shy about investing, consider mutual funds. When you buy into a mutual fund, your money is pooled with money from many other investors with similar or “mutual” goals, explains the California Society of CPAs (www.calcpa.org).
Professional money managers invest the money in stocks, bonds, and other securities. Each investor owns shares in the fund and participates proportionally in the fund’s gains or losses. Thus, you reduce the possibility of a significant loss from an individual holding.
To help you better understand the risks and rewards of investing in mutual funds, CalCPA offers the following key facts.
Guarantees — Mutual funds are not guaranteed or insured by the FDIC or any government agency. They are regulated by the federal government through the Securities and Exchange Commission (SEC), however.
Getting the facts about funds — All funds offer a prospectus that should be read carefully before investing.
If you have any questions about how mutual funds fit into your overall financial plan, talk to your CPA. He or she can help you determine the best type of fund for achieving your personal financial objectives.