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Are Mutual Funds Risky?

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From Quick Guide: Guide to Mutual Funds

Summary: Mutual funds tend to be less risky than buying individual stocks because of the diverse group of investments held by mutual funds. Consider the track record of the mutual fund manager, the individual securities in the fund, and the mutual fund company reputation to assess risk with help from a financial consultant in this free video on investments.

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By John Pinelli
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John Pinelli is an insurance representative for Northwestern Mutual.read more

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Video Transcript

"Okay, this is John Pinelli, Financial Representative, and today we're asked the question 'Are Mutual Funds Risky?' Well, in general, mutual funds are more stable than buying an individual stock. When you have your mutual fund, what you're doing is the mutual fund manager, the person who is paid, essentially, to manage your money, will take a percentage of that. But the service they provide in return is they're pooling that money together with you and other investors, and they're buying a diverse group of investments. Now, with that diversity you're able to eliminate a lot of the risk that's associated with an individual stock investment. So that's an advantage of a mutual fund. They are still risky because the securities that they hold, typically stocks, they can be other equities, such as bonds, or money, typically do carry a level of risk them as well. Recently, many mutual funds have been falling by twenty, thirty, forty percent. Significant declines, and that's because the securities within those mutual funds, which those mutual funds are made up of, have been declining. So an important thing to look at when considering a mutual fund is, number one, look at the manager. See their track record. See how they've been doing in the past, and what they propose for the future. And also number two, look at what the mutual fund is comprised of. What are the individual securities within that fund. And then number three, look at the company that you're going with. Mutual fund companies are....range from very reputable to less reputable. So make sure that you're going with a good company, somebody that's been around a long time. Something that's stable, and something that's going to fit with your individual preferences. So this has been John Pinelli talking about Are Mutual Funds Risky?"

eHow Article: Are Mutual Funds Risky?

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