Are Mutual Funds Safe to Invest In?

Many variables influence the safety of any financial investment, including mutual funds. But realizing that with great returns comes great risk is the first step in whether a mutual fund is a safe enough investment.

  1. Safe Investments

    • Of all the investment vehicles (certificates of deposit, stocks, bonds, mutual funds), CD's are the only ones insured by the Federal Deposit Insurance Corporation. This makes them the safest financial investment; not mutual funds.

    Investment Goals

    • The financial goal of the investor will dictate whether mutual funds are a "safe" investment. If the investor is seeking a guaranteed rate of return then mutual funds will not be a safe investment.

    Weighted Average

    • The ratio between stocks and bonds that comprises the mutual fund will also play a role in the safety of mutual funds as an investment option. Funds with an equal amount of both will fare better in all economic climates than those weighted more heavily one way or the other.

    Economic Climate

    • If mutual funds are heavily weighted with stocks and the economic climate favors bonds, then the fund will not be "safe" for the investor, since the market is working against him. The same principle holds true if bonds make up the majority of the portfolio during an economic climate that favors stocks.

    Quality

    • Mutual funds are only as good as the stocks and bonds that they consist of; therefore, for a mutual fund to be "safe" it needs to consist of quality companies that have a greater potential of not going under themselves during tough economic climates.

Related Searches

References

You May Also Like

  • How to Keep Your Mutual Funds Safe

    The terms and options may be daunting, but mutual funds are a fairly safe choice for beginning investors. Like in all investing...

  • Safest Mutual Funds to Invest in

    Investors looking for safety have a number of choices. These safe investments do not provide the highest yields, but they do provide...

  • How to Select a Good Mutual Fund

    Sometimes it seems there are as many mutual funds as there are people, but it's important to take the time to choose...

  • Are Money Market Mutual Funds Safe?

    Although money market funds carry no Federal Deposit Insurance Corporation insurance, they are considered very safe investments. Money market accounts held at...

  • Safest Investment for Emergency Funds

    A money market mutual fund can also be a good choice for building an emergency fund. ... sometimes referred to as mutual...

  • Are Bond Funds Safe?

    Are Bond Funds Safe?. ... Mutual funds may be open-end funds, meaning that redemption prices are computed after the close of the...

  • Why Is it Good to Invest in Mutual Funds?

    If you want to get started buying stocks and bonds, you can buy individual shares and individual issues, or you can purchase...

  • How Safe Are Money Market Funds?

    People with money to invest often look for safe investments that yield a good return. Money market funds provide a lower risk...

  • Are Mutual Funds Good or Bad?

    Selecting a relatively convenient investment strategy essentially comes down to choosing between mutual funds or picking individual stocks, bonds or commodities ...

  • Safety of Mutual Funds

    Mutual funds are a type of investment that many investors and experts consider relatively safe. A mutual fund is an investment vehicle...

  • Fidelity TIPS Funds

    Several other safe, low-yield investments remain available. ... A Blue Chip Mutual Fund is an investment correlation of some of the largest...

  • I Need a Safe Rollover From Mutual Funds

    When you invest your money, you need to strike the proper balance between security and yield. Risk and reward are intrinsically tied...

  • The Best Investments for Income for Seniors

    The Best Mutual Funds for Retired People; Safe Investments for Seniors; Print this article; Certificates of Deposit. ... Products for Seniors for...

  • Safety of GNMA Funds

    Safety Rating of Mutual Funds. Unlike bonds and insurance companies (for which there are ratings agencies), mutual funds are rated in terms...

  • Safest Investment Funds

    Investment funds, sometimes referred to as mutual funds, are popular investment products. According to the United States Securities and Exchange Commission (SEC...

  • Top Short-Term Mutual Funds to Invest in

    A short-term mutual fund is a good place for money you want to keep as safe as possible, as all short-term mutual...

  • Why Would You Invest in a Fixed-Income Fund?

    The safety factor makes fixed-income funds a good choice for short-term money, ... Mutual funds have become extremely popular investment options during...

  • The Best Mutual Funds for Conservative Investors

    But losing value does not necessarily mean the fund is not a good mutual fund. ... Mutual funds are one of the...

  • Invest Money to Make Money

    Being relatively safe investments, mutual funds can have lower returns than direct stock, bond and commodity investments, but they tend to bring...

  • Good Time to Invest in Bonds & Mutual Funds

    Bonds and mutual funds are different types of places to invest money in than stocks, as they make a profit over a...

Related Ads

View Blog Post

Can Certain Colors Cause You to Spend More?