By Nick Heckman
Your bills are all paid on time this month and you have some spare cash lying around. Last time this happened, you took a trip to Vegas— and we all remember how that turned out. If you’re looking for a new way to make some extra income then think about mutual funds.
the money pool
Think of buying mutual fund shares as "co-operative investing."Remember the saying that "you’ve got to spend money to make money?" Mutual funds, like all investments, are the perfect example of this idea in action. They’re kind of like buying stocks, except that instead of using one person’s money a mutual fund pools your money with a group of fellow investors and uses it to buy stocks, bonds, and other securities.
Think of it as "co-operative investing." You share in the fund’s gains, losses, and expenses based on how much you put in. While you might not make as much as if you invested by yourself, your potential losses will also decrease. In other words, there’s a smaller risk.
Look at the trends to decide which fund is for you. Chad Winklepleck, an investment representative with Edward Jones says, "Investors should invest in mutual funds that have a proven track record in both up markets and down markets." Even though what happened in the past can't guarantee anything for the future, this will give you a good idea of how your fund will perform and whether or not you're investing wisely.
Mutual funds are legally known as "open-ended companies." This means that at the end of every day, the fund will both continue to invest in holdings for
contributing investors and buy back shares from investors that want to leave. In other words, you can get out of a mutual fund whenever you want and take your profits with you.