Planning for the Future
Planning for the Future

What is a Mutual Fund?

A mutual fund is an investment company that pools money from shareholders and invests it in a variety of securities, including stocks, bonds, and short-term money market instruments.  When you invest in a mutual fund you actually purchase shares of the fund.  

Why Mutual Funds?

Mutual funds provide a way to reduce the risks associated with investing in individual stocks and bonds while also achieving competitive returns. There are four primary advantages of investing in mutual funds.

  • Diversification
    Even with a minimal investment you can purchase shares of the fund, which in turn, purchases shares of many different companies in different industries and different geographic areas.
  • Professional Management
    Mutual funds are run by professional fund managers. It is their job to buy and sell stocks and bonds within the fund to meet the stated objectives. You get the benefit of their knowledge and experience.
  • Liquidity
    You can buy and sell mutual fund shares on short notice, so your money is available to you anytime. Remember, though, if you are using mutual funds for a retirement plan there are still restrictions on when you can actually withdraw money.
  • Flexibility
    You can choose a fund or portfolio of funds with investment objectives that most closely match your own goals.

What Kind of Funds?

There are many different kinds of mutual funds with a variety of investment objectives. A few of the types of funds you may see include the following.

  • Balanced Funds
    Combine stocks and bonds in a single fund. Stocks tend to provide more long-term growth in value and less current income paid through dividends. Bonds tend to provide more current income through interest and dividends paid. Balanced funds may be tilted toward growth or income or evenly split.
  • Growth Funds
    Comprised primarily of stocks which tend to grow due to increases in the market value more than through the payment of dividends.
  • Fixed Income Funds
    Comprised primarily of bonds and other securities that tend to pay interest and dividends on a regular basis. The market value of a fixed income fund will also fluctuate but these funds tend to pay more current dividends and provide less change in market value than growth funds.
  • Index Funds
    Mirror a market index, or buy the same securities that comprise the index. For example, a fund that mirrors the S&P 500 would include the stocks of the 500 leading companies by sector on the NYSE or NASDAQ. This index is used to measure performance
    of the broad U.S. economy. Index funds are not actively managed; they simply hold the securities that the guiding index contains.
  • Managed Funds
    Rather than just following an index the fund manager bases decisions on his knowledge, experience and research to guide the fund. The holdings in the fund may change more often than an index fund.
  • Global Funds
    International funds invest exclusively in foreign securities while global funds may include both U.S. and foreign securities.
  • Sector Funds
    Invest all their money in one market sector such as energy, technology or manufacturing.

What Are Sales Charges?

Some mutual funds have sales charges or “loads” that are added to the actual share price.

  • Front Load
    A sales charge is added to the share price at the time you invest money into a fund. These sales charges vary from fund to fund but typically range from 3% to 5%, but may be more or less.
  • Back Load
    Also called a contingent deferred sales charge, is not added when you purchase shares but is deducted from your holdings if you sell your shares too soon. Back load funds may require that you hold your shares for from 2 to 6 years to avoid these charges if you take money out.
  • No-Load
    A true no-load fund allows you to buy and sell shares at any time without the addition of a sales charge.

When investing, you need to make a number of critical decisions in order to pursue your financial goals with confidence.  That’s where the Trust Department of Jackson County Bank can help.  We use a Portfolio Approach that encompasses the entire decision-making process.

Start by meeting with an experienced trust officer and participate in a complete assessment of your financial position that will cover your current needs, future goals, time frame, and risk tolerance and expectations for return.  Your trust officer will then work with you to develop an investment plan.  

It is essential that your investment plan continues to work toward your objectives.  To ensure this, we will meet with you at least annually, or whenever you wish, to evaluate your circumstances and make adjustments as needed.  

We use no-load funds from Federated Investors, a top investment management firm, in our investment programs.  With expert managers selecting the individual securities within the mutual funds, our trust professionals are free to concentrate on what we do best – providing exceptional personal service.

Securities offered by JCB are not guaranteed, not FDIC insured, and may lose value.

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