Historically, precious metals mutual funds have been top performing funds. This makes them a safer bet than many other types of funds, which is why a lot of investors are drawn to them. The precious metals mutual funds that are available for investors today are funds that buy up stocks in precious metals, which are highly profitable commodities, especially in times where the financial markets are in a state of instability. Gold, silver, platinum and other metals are usually good “bets” when investing in stocks, and mutual funds are structured so that investors do not put all of their investment dollars into one type of commodity stock. Stocks in this type of mutual fund are typically diversified among various metals companies and mining operations in order to minimize risk.

As stated above, precious metals are typically a safe bet for investors, and safer still when investors are buying into a precious metals mutual fund. This is because mutual funds offer diversification. Because there is more than one type of stock in the mutual fund, if one stock is a poor performer, other better performing stocks can sometimes pick up the slack. Moreover, if a company that the fund invests in goes under or files for bankruptcy protection, the fund can recover and even remain profitable in most instances. Precious metals mutual funds are managed by a professional fund manager who is adept at reading market conditions, and who knows when to buy and when to sell. Shareholders do not have to worry about making decisions about stocks in the fund; it is already done for them.

Mutual funds offer three ways for shareholders to earn money on their investment. First of all, if the stocks in precious metals mutual funds pay dividends to stockholders, then these dividends are paid to shareholders of the mutual fund directly from the fund in most instances. Mutual funds may also receive capital gains when the fund manager sells off stock in the fund, and these gains are passed on to the investors in the fund via capital gains distributions. Last of all, if individual shareholders in the precious metals mutual fund wish to sell off their shares, they can profit from any capital that is gained from the sale of their shares.

Naturally there is a tradeoff for investors who go for the safety and diversification that is afforded to them by precious metals mutual funds. Income that is derived from the fund is taxable, and any dividends that shareholders reap are reported to the Internal Revenue Service or IRS. Unlike other types of investments like deposit accounts, CDs or T-Bonds, there are no guarantees against default for investors in mutual funds, and no government insurance exists to protect investors from that risk.

Since there are definite advantages to the precious metals mutual funds on the market, they are a viable investment vehicle for many investors. Before putting your money into such a fund, however, it is important that you review the drawbacks of the funds available, too.

Bill R. Smith is a writer who has spent a lot of time investigating avenues of personal investment and knows a thing or two about saving and making sound investments. His new finance blog located at Personal Financial Management is devoted to all topics related to finance.

Bill R. Smith is a writer who has spent a lot of time investigating avenues of personal investment and knows a thing or two about saving and making sound investments. His new finance blog located at http://www.personal-financial-management.com is devoted to all topics related to finance.

Author Bio: Bill R. Smith is a writer who has spent a lot of time investigating avenues of personal investment and knows a thing or two about saving and making sound investments. His new finance blog located at Personal Financial Management is devoted to all topics related to finance.

Category: Finances
Keywords: personal financial management, personal finance tips, personal investment advice