Mutual Funds Explained

By Elyse Umlauf-Garneau, REALTOR® Magazine

Everyone tells you to invest in mutual funds, but what funds to pick and how to allocate investments within a fund family can send the most money-savvy person running for the hills.

In Mutual Funds for Dummies (Foster City, Calif.: IDG Books Worldwide Inc., 1998; $19.99), author Eric Tyson demystifies the mutual fund game, telling you in straightforward, digestible bits what mutual funds are, why they’re a smart investment, how to choose the right fund, and how to read those dense prospectuses (he even provides pictures).

If you’re beyond the basics, you can cruise by the easy stuff and get into the nitty-gritty of creating a portfolio that meets your personal needs.

Speed your read even further by looking for icons throughout the book that give you down and dirty information on the chapters’ topic. Little shark tails, for instance, denote deadly mistakes. Bull’s-eyes denote tips.

One of Tyson’s tips: “The most valuable information–the fund’s investment objectives, costs, and performance history–is summarized in the first few pages of the prospectus. Read these. Skip most of the rest.”

One of his shark tails: “Context matters. In their marketing literature, fund companies usually compare their funds’ returns with selected benchmarks. Keep a wary eye on these comparisons. In the great American advertising tradition, fund companies often pick benchmarks that make it easy for their funds to look good.”

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This post was contributed exclusively for REALTOR® Magazine.

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