Dollars and Sense
Mutual Funds Spread Risk
BYDAVID UFFINGTON

If you want to dabble in the stock market but don't have a lot of money you want to risk, investing in a mutual fund can be a safer starting point than if you just pick a stock to buy.

The big advantage in mutual funds is the diversification and lowered risk. One share of a mutual fund might be spread out among a hundred or more stocks. If there's a problem in one, such as bankruptcy, it doesn't affect the whole fund.

Mutual funds are run by money-management companies, and often one individual

who is registered with the SEC) is in charge of a fund. Whether you've invested $100 or $100,000, you get the same money manager handling your investment.

Mutual funds are easy to get into and out of. There are many you can invest in for low cost or for a small amount per month, unlike stocks. You can cash out when you want to by putting in a sell order and will receive your check within a week.

There are some caveats about mutual funds, however.

• Mutual funds have fees with various names -- transaction cost, purchase fee, distribution expense, management fee - - and all of them will reduce the amount of your profits.

• One decision to make before you invest is whether you'll go with a load or no-load fund. A load is your sales and handling charge, either paid up front (front-end load) or when you sell your shares (back-end load). Rule of thumb is that any load you pay is money that won't be earning more money for you. Over time that can add up considerably.

• Mutual funds are not insured by the government, but they are required to register with the SEC and follow certain rules for investor safety.

• You don't have a say about what type of investments are made.

• The higher the possible rate of return, the high the risk.

Before you invest in a mutual fund, study the prospectus (especially the fee table), check out the history and read shareholder reports to determine if the fund's level of risktaking is compatible with yours. Use an online load-no load calculator to understand how the fees will affect your profits.

David Uffington regrets that he cannot personally answer reader questions, but will incorporate them into his column whenever possible. Write to him in care of King Features Weekly Service, P.O. Box 536475, Orlando, FL32853-6475, or send e-mail to columnreply@gmail.com.

(c) 2007 King Features Synd., Inc.