A mutual fund combines the money contributed by multiple investors and uses it to purchase bonds, stocks, or other securities. Investors who put their money into a mutual fund receive a stake in each of its investments. These funds are attractive to investors because they provide a way to diversify the investment portfolio with a much smaller monetary contribution than is required if individual bonds and stocks are purchased.
The manager of the mutual fund buys, tracks, and sells the holdings in the fund. The price of the fund is based on its net asset value. This is equivalent to the total value of the fund-owned securities divided by the number of outstanding shares. The net asset value fluctuates daily and is based on the price fluctuations experienced by the fund’s holdings.
FMI Large Cap is a well-performing large blend fund that owns only 25 to 30 stocks simultaneously. The Yackman Fund is a large value fund that also limits its holdings. Investors seeking a fund that focuses on the healthcare industry should look at Fidelity Select Medical Equipment and Systems. The concentration of holdings allows these funds to capture the best ideas of its investment managers and reduce the tendency for mediocre returns do to overdiversification.
A high quality gold mutual fund will earn more than its competition when the market is good and will lose less when the market is bad. Some of these funds make large investments in cash holdings to brace themselves against a poorly performing market. Sextant International is a high performing large blend foreign fund that has almost 40 percent cash holdings.
FMI Large Cap, the Yackman Fund, Fidelity Select Medical Equipment and Systems, and Sextant International are just a sampling of the best mutual funds for 2010. Investors should also research Templeton Global Bond, Eaton Vance Tax-Managed Emerging Markets, TCW Total Return, Thompson Plumb Bond, Managers Intermediate Duration Government, Greenspring, and Parnassus Workplace. Some experts believe that each of these funds is poised to perform well during the current year.