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Mutual Funds are almost what the term implies. Investors share in the performance of a pool of money invested in a particular security, such as stocks, mutually but in proportion to the amount invested. For example, if you invest $1000 in a mutual fund, and the fund is $1 million in size, own 1/1000th of the fund, but your gains and losses will be mutually effected along with all the other investors. Since funds invest in 50 to 70 different securities, and the investments are expertly managed, your downside is minimized greatly. However, your upside is also controlled by the total growth in all the stocks in which the fund is invested. Which brings us to the cons of investing in large pools like mutual funds. When the market is down, mutual funds that invest in large companies that represent the market indices, such as the Dow, go in the same direction. For the investor to escape prolonged downward slides, like the one we experienced between years 2000 and 2003, you would have to sell you shares. Otherwise, all prior gains could be cancelled out by subsequent reductions in value. Lastly, the performance of most mutual funds as mirrored the stock market trends. That is because they represent a large percentage of the market. Therefore, it is very important to watch the recent totals is gains from the fund in which you are invested. It might be a good time to seek advice on what your alternatives might be. The value of your investments should be checked frequently and not taken for granted.

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