- 1). Research the type of mutual fund you want to start; there are short-term and long-term mutual fund investments with a variety of funding options, so researching is vital to making an informed financial investment decision. A few examples of mutual fund categories is as follows: Income fund, precious metals and minerals fund, capital growth fund, tax exempt long-term fund and many others.
- 2). Read the Prospectus. If your bank offers mutual funds, they must also offer the Prospectus, which the fund investment’s objectives, strategies, manager information, income distribution, past performances, financial statements and last but not least the risk level involved with the fund. Take your time and read this information in the Prospectus very carefully and attentively, the information within the Prospectus will answer questions that are crucial to the success of your finances.
- 3). Request the annual report for the fund--this information may not be included in the Prospectus. Be sure to get information from the annual report that includes information that was not within the Prospectus, such as the market indices, events and strategies that may have affected the funds recent activity.
- 4). Decide if you want to buy a mutual fund with a load--this is a sales commission fee that is deducted from a portion of your initial investment. Some mutual funds will require a fee to compensate the fund manager who is responsible for choosing good investments for you--also there is the cost of postage, accounting, record keeping and customer service that the company charges for starting or buying a mutual fund. There are, however, no-load funds that do not require a sales commission at all, so your investment benefits you with no added fees.
- 5). Prepare to possibly pay a fee if you choose the load fund, which requires a percentage of your initial investment. For example, if you invest $1500 and the fund manager’s commission fee is five percent, only $1425 will go into your fund and $75 will go towards the commission and other applicable fees.
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