To achieve its investment objective —
whether it is long-term growth or
capital preservation
or anything
in between — the fund's manager invests in securities
he or she believes will provide the results the fund seeks. To
identify those securities, a fund's research staff often
uses what's known as a
bottom-up style,
which involves a detailed analysis of the individual
companies issuing the securities. When the objective is small-company
growth or the focus is on emerging markets, the process can be
more difficult because there's limited information available.
You may choose mutual funds with specific
investment objectives to round out your portfolio of individual
holdings. Or you may choose a number of mutual funds with different
objectives creating a diversified portfolio in that way.
A wider viewpoint
Many
investors use mutual funds to invest in world-wide markets. Most
experts agree that international investing is a good idea, both
as a hedge against market downturns at home and as a way to take
advantage of strong economies abroad. But investing overseas can
be complicated, for reasons ranging from currency fluctuations
to taxation policies. Funds handle these details for you.
In the family Mutual fund companies or other
fund sponsors such as banks and brokerage firms, usually
offer a variety of funds — referred to as a family
of funds — to their investors. But like most
families, some members turn out better than others.
So while it can be convenient to keep all your money
in one family, you may realize stronger returns by
choosing funds in different families to meet specific
goals.
A wider viewpoint
