Grow your savings with mutual funds.
Give your money the chance to earn interest over time.
It seems easier to save for a short-term goal like buying a new TV, than to think about investing to help you pay for the bigger things in life. But if you are looking to buy a new home, want to get a head start on retirement or want to have an emergency fund grow over time - mutual funds1 can help you reach your goals. They simplify investing for the average person, who may not have the time or desire to research every stock and bond out there.
Because of the thousands available, trying to choose mutual funds that may be best for you can be pretty intimidating. But it's not hard to narrow down the field when you understand the basics. You can learn more about how mutual funds work below and when you're ready, contact an Allstate Personal Financial Representative. We'll help you get started.
Get to know how mutual funds work.
- What: A mutual fund is a pool of investments usually a combination of stocks, bonds, and cash instruments.
- How: They're managed by professional money managers who often charge a fee. Money managers choose investments based on the objective of the mutual fund. Examples could include growth, income or value investing.
- Objectives: Mutual funds are managed based on specific investment objectives. Based on this, you should research mutual funds that fit your investment risk tolerance and time horizon. As an example, if retirement is right around the corner, you may want to select a fund that has less risk exposure, such as bond funds or money-market funds.
- Risk: Some mutual funds are low-risk, meaning they can potentially earn less while others are high-risk and can potentially earn more. One way to spread out your risk is to diversify the types of mutual funds you own. Although diversification does not ensure a profit or protect you from loss, you can decide how much risk you are comfortable with to help determine the right mutual funds for you.
- Time: Do you have specific goals with different time horizons? Mutual funds offer a variety of options to meet your short and long-term savings goals.
There are many types of mutual funds, but four general categories.
Money market Funds
Target Date Funds
Money market funds2
This is the lowest-risk mutual fund designed to keep your money safe until you need to access it. You could use this fund for an emergency account. The fund allows you to write checks to withdraw money but usually has a maximum number of checks you can write each year and a minimum amount.
A bond mutual fund is typically low-risk and helps add stability to your investment mix. When the stock market drops, more conservative bond funds can help balance out your higher-risk investments. As you near a specific goal like paying for college, think about moving that savings into a bond fund, designed to preserve your savings. The value of bonds will decline in value as interest rates rise.
A stock mutual fund is a higher-risk investment and may be a more suitable choice when investing for the long-term. As the name implies, these types of funds typically invest in common stocks found on the stock exchange. The stock market can be more volatile in the short term, but if your retirement money will be growing for as much as 20 or 30 years, buying stock mutual funds have the potential to grow your savings over time.
Target date funds.
A target date mutual fund is designed with a specific year in mind and takes care of asset allocation and rebalancing for you. For example, you choose the date when you plan to retire, say 2030. Over time, the fund will automatically rebalance to an appropriate blend of investments and become more conservative to help protect your savings as you get closer to your 2030 "target date" of retiring. The principal value of the funds is not guaranteed at any time, including at or after the target.
Questions? Contact an Allstate Personal Financial Representative. We partner with reputable mutual fund companies to give you choices when it comes to your savings. Ask us how to get started today.