How do you make money invest in mutual funds? Basically there are two ways to make money and two ways to lose money to invest in mutual funds. Let’s go down to the basics.
There are thousands of funds to choose from and most of them will fall into four categories based on where they invest money (your money). They are called: Equity (Stock), Bonds, Money Market, and Balanced Funds. In all the things above you open an account, invest money, and this buy you share. You make money invest based on the number of shares you have. The same applies if you lose money to invest.
Let’s start with the most popular and most risky categories called equity funds, which invest money in stock, which is also called “equity”. Why invest money here? The main objective is growth, with dividend income as a secondary goal. You make money invest here when stock prices rise, and from dividends. You lost money when the stock price fell. Dividends come from shares in the fund portfolio and are forwarded to you. Those (like all dividends) are yours to be saved. The main attraction of equity funds: potential high refund.
Bond funds have one main goal: higher income in the form of dividends. They are also called income funds, and are generally safer than equity varieties. You invest money here to get a higher dividend than you can get elsewhere. Dividends come from interest obtained in the Fund Bond Portfolio. You can also make money investing when stock prices rise; and lose money when stock prices fall. Usually, there are fewer fluctuations in price than you will find in the equity or stock category.
Balanced funds are media that are happy between the two above, because they invest money both in stock and bonds. Therefore you make money from the two rising stock and dividend prices, and lost money to invest when stock prices fall. Here you have a moderate risk.
Money market funds are a safe alternative and you make money in it in just one way: dividends. They invest money and get interest in high quality, short-term IOUS (on the money market). The interest they convey to you in the form of dividends. Stock prices are set at $ 1 and do not fluctuate. Very rarely do investors lose money to invest here.
Most people invest money in mutual funds as long-term investments. So, in most cases they only allow funding companies to reinvest all dividends (and other distributions) to buy more shares. Distribution (such as Capital Gain from the Sale Stock) is rather technical. Don’t worry – if you come, you will get your part. And you will also receive periodic statements that show activity in your account.