Mutual funds invest shareholder's money in stocks and bonds. When you buy shares in a fund, your money combines with that of thousands of other shareholders with similar investment goals. The fund's professional investment manager invests the money and monitors all investments to make sure they continue to meet the fund's - and the shareholder's - goals.
Mutual funds are so popular for three basic reasons: professional investment management, diversification, and convenience.
Professional Management. A fund lets you take part in the stock and bond markets without worrying about which securities to buy or sell. The fund's investment manager - a person who spends every working hour trying to make the best investments - makes all those decisions for you.
Diversification. Although no investment is 100% safe, a multi-million dollar fund can reduce risk by spreading its money out over dozens, or even hundreds, of different stocks and bonds.
Convenience. The fund will do all the bookkeeping for your account and is ready to accept money whenever you want to invest, and to redeem your shares when you wish.
Some mutual funds invest conservatively, while others take high risks in pursuit of capital gains.
Government Bond Funds aim to pay high interest backed by securities issued by the U.S. Government. Government bond funds generally pay a higher interest rate than money market funds; however, both yield and price will vary with market conditions. If interest rates in the economy rise, for example, the fund's yield will gradually increase, but the value of shares will decline. If rates fall, the yield will sink, but your shares will be worth more. This variability occurs with all kinds of bond funds, not just government funds.
Tax-Exempt Bond Funds invest in bonds issued by states and municipalities, and the income they pay out is free from federal taxes. Because tax-exempt funds pay less income than comparable taxable funds, they are not for everyone. But if you are in a relatively high tax bracket, you will usually come out ahead after taxes in the tax-exempt fund.
High-Grade Corporate Bond Funds concentrate on paying high income by investing in the bonds of the strongest, most financially secure American corporations. They are second in quality only to U.S. Government bond funds and pay a slightly higher yield.
High-Yield Corporate Bond Funds invest in the bonds of young, unproven or financially troubled corporations. Since these companies are not as financially strong as other corporations or the U.S. Government, high-yield funds are generally riskier than other bond funds. But if you are willing to accept the risk, you earn one of the highest mutual fund rates available.
Growth Funds invest almost entirely in stocks, typically those of strong, well-established companies. The fund's goal is to make the value of your investment appreciate over time, though they may also pay a small amount of income from stock dividends.
Aggressive Growth Funds typically invest in stocks of small, rapidly growing companies. The funds focus on growth and pay little or no income. In the near term these are less stable in value than just about any other kind of fund; however, the potential for long-term return is greatest. Income, Balanced, and Growth-and-Income Funds all hold both stocks and bonds. You get a two-part return; steady income from the bonds and stock dividends and, in a rising stock market, growth in the value of your investment. Income Funds emphasize bonds, usually keeping at least half of their portfolio invested in bonds, a minimum of about one-fifth. Growth-and-Income Funds have the freedom to invest entirely in stocks if the investment manager thinks it advisable. Since stocks fluctuate in price more than bonds, Growth-and-Income Funds will be less stable in value than balanced funds, which in turn will be less stable than income funds - but also potentially more profitable.
A mutual fund differs from a CD, for example, in that there is no fixed rate of return; in fact, for some funds the yield may change daily. In addition, there is no government insurance like FDIC on the principal invested or earnings. The principal and yield of the investment vary with market conditions. A mutual fund typically offers the potential for a higher rate of return in exchange for an investor taking on a higher degree of risk.
Each fund's prospectus contains more complete information, including management fees and expenses. Contact an OFG Financial Services, Inc. Representative and request a
prospectus. Read it carefully before you invest or send money.
Listed below are the Mutal Fund Companies that we have a selling agreement with.
ALGER & CO.
AMERINDO TECHNOLOGY FUND
COLUMBIA DISTRIBUTOR INC.
EDGEWOOD SERVICES INC.
FTJ FUNDCHOICE LLC
FIDELITY INVESTORS (ADVISOR FUNDS)
FIDELITY DESTINY PROTFOLIO
FRANKLIN TEMPLETON FUNDS
GOVETT FUNDS (FPS BROKER SERVICES)
LORD ABBETT & CO.
MAINSTAY FAMILY OF FUNDS
MASSACHUSETTS FINANCIAL SERVICES
NEW ALTERNATIVES FUND
PARK AVENUE PORTFOLIO
PRINCIPAL FINANCIAL (PRINCOR)
SECURITY DISTRIBUTORS INC.
FIRST EAGLE SO GEN
STATE STREET - METLIFE
VAN ECK FUND GROUP
VAN WAGONER FUNDS
WADDELL & REED