company executives and factories to evaluate the firms’ prospects firsthand. You have almost no opportunity to become as knowledgeable as these fund managers without quitting your job and taking up investing full-time. A mutual fund gives you instant diversification. If you have only $1,000 or $5,000 to invest, the money will not buy many shares of a single stock,Giubbotti Moncler, and it will certainly not buy many different stocks. By putting your money in only two or three stocks, you are exposed to the possibility that one of them will plummet in price,Doudoune Moncler, wiping out much of your investment capita. Instead, when you put your $1,000 or $5,000 in a mutual fund, your money buys into a portfolio that may comprise 50 stocks,Ralph Lauren Polo Shirts, or maybe 500 different issues. If one or two stocks in the portfolio get hit hard,Ralph Lauren, your losses will be much more limited because many of the other stocks will probably be going up at the same time. A fund exists for every financial goal and risk tolerance level. Armed with your goals and risk level from the first chapter, you can find a fund that fits your situation. The different types of funds are described in more detail later in this chapter, but in broad terms, there are funds designed for various degrees of growth and for varying levels of income, as well as funds that combine both growth and income objectives. Transaction costs are much lower. When you invest in a mutual fund, you benefit from the brokerage commission rates paid by the fund company, which are far lower
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