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Most Important Mutual Fund Terms

In order to become a successful mutual fund investor it is absolutely obligatory to know the meaning of the following terms.

Mutual Fund

Without knowing what exactly a mutual fund is, you have no place at the mutual fund realm. You will not be informed of the exact essence of mutual funds, so how will you be able to use them in your advantage?

Expense Ratio

It represents one of the most important factors that should influence your investment decision. The fund's expenses have a direct impact on your returns, so you should be familiar with the meaning of expense ratio.

Turnover Ratio

This is another with which you should become familiar, since it can provide important details when you decide on the mutual fund you want to invest in. It also plays an important role in taxable accounts.

Net Asset Value

It represents the price of the shares of a particular mutual fund, which is calculated daily. The estimation itself represents an easy process, but NAVs have their hidden traps, which you should learn to overcome.

Load

It is the sales charge that you should be very careful for. Loads represent an additional cost you should consider. Additionally, you should learn the different kinds of loads in order to identify the type of load before you when selecting an investment in a particular fund.

Annual Return

This is with what most companies try to attract their clients. The estimation of the annual returns can be done in several ways, with which you should become familiar and manage to identify the differences.

Fund Prospectus

The prospectus provides information on the fund. It is your right by law to ask for a prospectus from the fund you are considering investing in. Acknowledge yourself with what you should look for in a prospectus and which information to use.

Index Fund

Index Funds have been recognized as one of the best investment choices and as such recommended as a valuable part of your portfolio.

Money Market Funds

Another type of mutual fund, which has been praised for its low level of risk. Acquaint yourself with them and you will see on what basis their popularity lays.

Fund Style

You should definitely find why the style has an important role in investment decisions. Since the word "style" has many meanings in the investment jargon, be sure to understand them and manage to use them appropriately.

These are some of the basic terms, which you will encounter most often. But they are not the only one, so we leave it up to you to enrich your investment vocabulary, because you success as an investor depends on it.

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