What merits do mutual funds hold, that a considerable number of people have started opting for them? The basic and the most important advantage of a mutual fund is professional management, a feature that most of the other investments such as direct stock investments do not have. Mutual funds are managed by a team of experts who are headed by a fund manager. Here we try to explain the core concepts related to mutual funds and also lists out some of the best mutual funds for 2012, that are currently in operation and are expected to show a fascinating performance throughout the year.
What are Mutual Funds
A mutual fund is principally a collective investment scheme, that is a pool of funds contributed by several investors. The invested portion of the fund is known as a 'share' and periodic return or reward of the fund is simple referred to as a 'return'. Fund managers usually invest the pools and funds into reliable and underwritten sources, which offer really good returns. The profits and returns which are earned by the mutual funds, are then distributed among its share owners or investors. This is how most common mutual funds work.
Now, there are some differences in the way different mutual funds are run, such as the rate of returns which are offered by the company or the structure of investments and repayment of yield. In some cases, the returns of the mutual fund are based upon specified factors such as a market indices of stock exchanges.
Alternatively, it might also depend upon different values, such as cash values and the net asset value (NAV) of the fund. All these features are collectively referred to, as the portfolio of the fund. A portfolio may be singular, that is, it may depict your investments only or it can refer to the entire pool of funds that have been used as a collective investment scheme.
Features of a Good Mutual Fund
The next question, that is bound to pop up in our minds is, what are the features which make a mutual fund a good one. Here are some leads:
- The first feature that should be taken into consideration is the company and the fund manager, who would be managing the fund. The better the reputation the better is the fund. Professional management means that incidences of risky investment would be drastically curbed down.
- The second point that can be taken into consideration, is the fund's portfolio, that is the places and destinations to which the mutual fund is going to be heading towards. These destinations include stock exchanges, bonds, money markets, preferential capital, etc. The sectors such as banking, automobile, steel, crude oil and others also substantially influence the returns of the fund. The portfolio should be aggressive but safe.
- The third most crucial point that needs to be considered is the mutual fund's investment and returns structure. Basically, the company providing the mutual fund would give you the structure and also a projection. The returns of mutual funds are usually made up of two parts, namely, the assured or guaranteed returns and the ones that cannot be guaranteed in some cases. Some funds do not have guaranteed returns. Calculate the rate of returns and judge whether the mutual fund sounds to be a suitable investment. Calculate the return over investment in percentage (%) as it makes for a better point of comparison.
Mutual Funds to Watch in 2012
The following is a list of some of the really good mutual funds, which have very promising features, great return over investments and excellent projections.
- Schwab Tax-Free Bond Fund
- Bruce Fund
- Nuveen Tradewinds Value Opp A
- MSIF Inc. Opportunity
- First Hawaii-Muni Bond Inv
- ING Value Choice A
- Permanent Portfolio Fund
- CA NASDAQ-100 Index Direct
- GMO Core Plus Bond Fund III
- ProFunds-Nasdaq-100 Svc
- Tilson Dividend
- Westcore International SC Rtl
- MassMutual Select NASDAQ-100 A
- Berkshire Focus Fund
- USAA Nasdaq 100 Index
- Oak Assoc-Red Oak Technology Selct
- Morgan Stanley Inst Advantage H
- Oak Assoc-Live Oak Health Sciences
Apart from these high performing funds, you may also explore other types of funds on the basis of the aforementioned points. All the needed details are usually disclosed by the investment company.