Understanding Mutual Funds

Finally, for more sophisticated investors, the risk statistics may be of help.

We will pick this topic up at another time, but let's walk away with a few key points and some homework:

Key Points:

• Mutual funds come in closed-end and open-end structures, each of which have different characteristics.
• Loads and fees are numerous and can potentially be deceptive in the ways in which they are charged.
• No two mutual funds are alike, with each one possessing a unique fee and risk structure.

Homework:

• If you don't currently own any mutual funds, consider starting a savings plan for investments and seek out a mutual fund with a low initial investment.
• If you are currently invested in mutual funds, ascertain the fee and load structure you are paying. Are there similar funds with a lower cost structure that you can switch to?
• Are any of your mutual funds chronic underperformers? If so, it may be time to shop around.
• Consider this: Can you achieve your investment objective with a lower cost ETF?

In forthcoming lessons, I will discuss the Mutual Fund Myth and ETFs.

In the meantime, you can email me your homework and your thoughts on the subjects covered in this article. I will compile the best ideas in a follow-up module of TheStreet.com University.