Mutual fund FAQ

What is a mutual fund?

A mutual fund is an investment that pools your money with the money of many other people with similar investment goals. Professional money managers use the pool of money to buy securities that will help achieve the mutual fund's specified objectives. Mutual funds may be an appropriate retirement investment because they offer professional management and diversification. Mutual funds are not FDIC insured and involve investment risks including possible loss of principal and fluctuation in value.

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Why should I invest in mutual funds?

Mutual funds are a quick, efficient, cost-effective means of managing money. They provide professional management, ongoing supervision of your holdings and automatic diversification, all important elements of a well-rounded investment program. Because shares can be redeemed on any business day, mutual funds provide liquidity, and because shares of a mutual fund are priced daily, you always know what your investment is worth. Investment return and principal value will vary with market conditions and an investor's shares, when redeemed, may be worth more or less than their original purchase price.

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When is a good time to start investing in mutual funds?

The sooner you start, the better. The longer your money can work for you, the better your prospects for wealth-building. The secret is to invest regularly. Regular investing, however, does not ensure a profit or protect against loss in declining markets.

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How do I select funds for investment?

The first step is to determine the goal or goals you wish to accomplish. Then determine your position on the risk/reward spectrum and eliminate funds that are too aggressive or too conservative. Once you have a list of funds that meet your goals and risk tolerance, review the funds' prospectus to ensure the funds' investment objective and risk meets your individual investment goals. A financial advisor can help you select the appropriate funds for your goals.

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How do I judge a mutual fund's performance?

To judge performance, you can use sales material relating to the fund, such as fund fact sheets, annual reports, fund prospectuses and other ranking information. We believe the funds for your portfolio are best chosen with the help of a financial advisor.

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What is a fund share?

A fund share represents a fraction of all the securities (stocks and bonds) owned by the fund. The prices of these securities may change daily; therefore, the value of your fund share may change daily, too.

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What does NAV mean?

NAV or net asset value of a stock is the price at which one share was sold to the public as of the previous business day's market close. The NAV of a mutual fund is determined by adding the value of all the securities in the fund's portfolio, subtracting debts and expenses, and dividing the result by the total number of shares outstanding.

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What does "total return" mean?

Total return is a measure of a fund's performance including reinvested dividends and capital appreciation. Listings may be calculated for different time periods and many newspaper listings will only provide this information weekly. Check for the time period being used.

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Should I always try to avoid mutual funds with the most risk?

No, it is possible to invest too conservatively which means you could run the risk of not earning enough to meet your financial goals. Investments that carry a very low risk and more stability tend to have a lower rate of return and you may lose purchasing power over time because of inflation.

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Why should I have a diversified portfolio?

Diversification or spreading your assets among a variety of investments helps to control the risk of poor performance by a single investment. A diversified portfolio increases your chances for achieving long-term growth. Keep in mind, however, that diversification does not guarantee a profit or prevent losses to your portfolio.

A report on the funds operations and holdings covering six months, or half of the fiscal year. Because they follow a fiscal year schedule and not a calendar schedule, semiannual reports may be issued at any time of year.

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You should consider the investment objectives, risks, charges, and expenses of a mutual fund carefully before investing. For a free prospectus, which contains this and other important information about each fund, call Ameriprise Financial at 800.297.7378. Read the prospectus carefully before you invest.

Investment products, including shares of mutual funds, are not federally or FDIC insured, are not deposits or obligations of, or guaranteed by, any financial institution and involve investment risks including possible loss of principal and fluctuation in value.

Brokerage, investment and financial advisory services are made available through Ameriprise Financial Services, Inc. Member FINRA and SIPC. Some products and services may not be available in all jurisdictions or to all clients.