Long-Term Investing in Mutual Funds
The efficacy of any investment should be evaluated on the basis of a risk-reward analysis, which is why, in this chapter, we examine the relationship between risk and reward as it applies to mutual-fund investing. The chapter begins with a look at the principle of diversification, which is a major advantage afforded to mutual fund investors. It then offers an example of a typical mutual-fund investment objective and explains that objective by delineating its various parts, with special emphasis placed on the concept of investor constraint. The chapter concludes with an explanation of some of the common investment strategies that are used in long-term mutual-fund investing and how to determine which mutual fund shares have been redeemed.