How Mutual Funds Make You Money ?

There are three main sources which can increase your return from mutual funds, get the value of your muntual funds up or at least give you a good knowledge to understand more mutual funds.

1) Net Asset Value (NAV)

This one is about as value of the mutual fund increases then the NAV price to the same.

2) Dividend Payments

This one is when a mutual fund receives dividends or interest on the securities in its portfolio, it distributes a proportional amount of that income to its investors.

When purchasing shares happenes in a mutual fund (you have bought), will leave you with making the decision between to receive your distributions directly or have them reinvested in the fund.

3 ) Capital gain

This last one is about when a fund sells a security that has gone up in price, this is a capital gain. But also it is about when a fund sells a security that has gone down in price, this is a capital loss.

Most mutual funds distribute any net capital gains to investors annually. Which will be usefull to you and everyone else.

If you think by now that mutual funds are heaven on heart let me qucikly correct you here. Because mutual funds can make you as well lose a lots of money.

In general all investments have some kind of risks to them. Some investments have greater risks to them and some investments have smaller risks to them. And it is up to you to decide what investemtns are which.

In every investment you can lose a lots of money even in mutual funds.

However there is one think you can do to decresse your risk of losing a lots of money. And that one think is to diversification of your portfolio.

Which means that you need spread your money in different industries and comapnies you are investing in. By buying invidual stocks and mutual funds in different fields will decrease the risk of losing a lots of money. Because if one fields begin doing very bad and you start losing money, you will always have the investments you have done in different fields will continue to make you money.

The thing with investing in individual stocks have bigger risks to it than the mutual funds have. But if you invest in invidual stocks and some of these stocks begin to do extremly good then you will make much more money from them than from mutual stocks which own the same stocks.

The most crucial element to all investing is alawys time whenever it comes to building the value of your investments. Thats why it is always important to never invest the cash you will need in the long or near future. But also not to invest more than you can effort to lose.

Because you will make much more money by investing in the long run than in the short run. Investing is something you will want to be doing for the long run to see the inevitable peaks and valleys of the market.

READ ALSO

How to Invest in Stocks (Quick guide)

What Is 401(k)?

You Can Find My Investing Portfolio Here

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