When investing in a mutual fund you need to consider investment objectives, investment strategies, risk, fees and expenses, and returns, but what are these?
Investment Objective. This is the financial goal of the fund. This could be to provide you with a stable income or maybe high returns or long-term capital growth.
Investment Strategy. This is the manner in which the portfolio is managed and allocated by the portfolio manager. Investment strategy typically includes the type of investments that the fund holds, such as “small-cap stocks” or “treasury bonds.”
Risk. The fund's assets can be affected by such things as interest rate risk (bonds) or market risk (stocks).
Fees and Expenses. Shareholder fees, such as sales charges and redemption fees, are deducted from the account. Annual fund operation expenses, such as management expenses, are paid from the fund's assets.
Expense Ratio. The percentage of the fund's assets that are used to pay its expenses during the year.
Annualized Returns. Average annual returns are usually available for periods of 1, 5 and 10 years and since inception of the fund. The returns usually reflect reinvestment of dividends and capital gains and the deduction of management expenses. Keep in mind that past performances is NOT a guarantee of future results.
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