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Mutual Funds

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Mutual funds offer many attractive benefits. Because they invest your money in a variety of securities, you enjoy diversification of your investment, which helps manage risk. And unlike many other investments, they provide liquidity, which means you can redeem your shares at any time.
Mutual funds can be a smart investment for nearly every investor's portfolio. With more than 300 different funds available, there are funds suited for virtually every investment goal and style. Funds range from very conservative to very aggressive, and strive to provide steady income, growth of capital, or tax-exempt income.
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Mutual funds have become "The Investments of the Decade"
When you invest in a mutual fund, you pool your money with money from other people who share the same investment goals. You own shares in the fund. The pool of money is invested by professional money managers, who choose securities they believe will help achieve the fund's financial objectives. You can profit from a mutual fund in two ways: from dividends earned by the fund's investments and by the gains made when the fund sells a security at a profit.
Mutual funds are not insured, and the value of your shares may fluctuate as market conditions change. So when you redeem your shares, they may be worth more or less than you paid for them.
Nevertheless, mutual funds offer many attractive benefits. Because they invest your money in a variety of securities, you enjoy diversification of your investment, which helps manage risk. And unlike many other investments, they provide liquidity, which means you can redeem your shares at any time.
Mutual funds can be a smart investment for nearly every investor's portfolio. With more than 300 different funds available, there are funds suited for virtually every investment goal and style. Funds range from very conservative to very aggressive, and strive to provide steady income, growth of capital, or tax-exempt income.
Unique Advantages of Mutual Funds
Mutual funds offer many special advantages some other investments might not have. They include:
Diversification
Diversification is a powerful investment principle that can reduce risk by spreading your money among different investments so you don't put all your eggs in just one basket. Different securities may perform differently under the same market conditions. By investing in a number of different securities, you may be able to blunt the effect of a decline in the value of just one.
Investing in a mutual fund is a way to diversify in a single investment. A fund's portfolio manager may invest in as many as 200 or more different securities.
Potential Growth
By investing in mutual funds, you have the potential for higher long-term earnings than if you invested in conventional savings. The potential growth is largely determined by the type of mutual fund you choose, its performance, the performance of the underlying markets, whether or not you reinvest your earnings, your investment time frame, and the tax consequences to you.
Liquidity
Most mutual funds are "liquid." That means you can redeem your shares at any time. You'll receive the current value of your investment, which may be higher or lower than the price you paid. Unlike a Time Deposit (CD) for instance, you don't have to tie up your money until a pre-determined date. Many mutual funds even offer check-writing privileges that allow you to write a check against your investment at any time. The money is withdrawn from your account when the check clears. Some types of mutual funds may charge a fee at liquidation.
Convenience
It's easy to invest in mutual funds. At Citibank, you can choose mutual funds from some of the worlds most reputed investment houses. You can also enjoy the convenience of having all of your investments in one place, which cuts down significantly on the amount of paperwork you'll receive.
Variety
Mutual funds invest in nearly every type of investment instrument you can think of. So if there's a particular type of investment you'd like to make, chances are you can find a mutual fund to match. By investing in a mutual fund, you'll receive all the unique mutual fund benefits as well as the underlying benefits of the investment type you select. Automatic Reinvestment
With most mutual funds, you can automatically reinvest your dividends and capital gains to purchase additional shares in the fund at no additional cost. This kind of compounding can significantly increase the value of your assets over time.
Many different types of funds are available to meet your needs :
Because the choice of mutual funds mirrors the financial market place, you can find virtually any kind of investment. Here are brief descriptions of the major fund categories.
Stock Funds
Stock Funds invest in the stocks of various types of companies. Traditionally, stocks have kept pace with the economy and represent your best protection against inflation. Some stock funds, such as growth, aggressive growth and value funds are based on a specific investment strategy. Others, such as small cap, mid cap, large cap and blue chip, choose securities determined by the size or financial status of the selected companies. Index funds are funds that attempt to replicate the composition of industry benchmarks, such as the S&P 500.
Bond Funds
Bond Funds seek to deliver steady income from a portfolio of bonds. Because of the added risk from price fluctuation inherent in longer-term bonds, yields vary based on the term of the bonds in the fund's portfolio. Short-term bond funds are considered safer, but tend to pay lower yields than riskier long-term bond funds. Intermediate bond funds offer higher returns than short-term bond funds with less risk than longer-term bond funds.
Hybrid Funds
Hybrid Funds combine different types of securities in one fund to meet varying objectives. For instance, a growth and income fund might invest in both stocks and bonds.
Asset Allocation Funds
Asset Allocation Funds combine securities from different asset classes in varying proportions to help manage different levels of risk and return. An example of this type is CitiSelect Portfolios, a family of mutual funds available exclusively through Citibank. Each portfolio invests in a different mix of stocks, bonds and cash in seeking different investment objectives.
International and Global Funds
These funds invest in securities issued in other countries. International funds invest only in foreign securities, while global funds invest in both foreign and U.S. securities. Many other mutual funds of all types may invest a certain percentage of their portfolio in international investments. Investors should see the risk factors section in the fund's prospectus for details regarding international investing.
Money Market Funds
Unlike all other types of mutual funds whose share prices fluctuate, money market funds attempt to maintain a stable share price of $1. To try to accomplish this, they invest in very short-term securities and commercial paper, which have less price fluctuation. Money market funds are intended as a parking place for money between investments and a place to maintain cash reserves. Over the long term, they do not keep pace with inflation. Different types of money market funds invest in taxable, tax exempt and U.S. Government securities. While money market mutual fund managers strive to maintain a stable net-asset value, the funds are not federally insured and there is no guarantee that a stable net-asset value will be maintained.
For more complete information on mutual funds, including sales and distribution charges and other expenses, ask for a prospectus. Please read it carefully before you invest or send money.
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