Massmutual Mutual Funds: A Guide To Investing

Investing in mutual funds is a great way to build wealth over time and achieve financial goals, such as buying a house or retiring comfortably. MassMutual offers a range of mutual funds that can help individuals meet their financial objectives. When investing in mutual funds with MassMutual, a financial professional will help individuals build a plan to meet their needs, understand their financial goals and objectives, and choose the right products for their situation. MassMutual mutual funds provide access to diversified, professionally managed portfolios and are known for their investment objectives and the types of returns they seek. Before investing in MassMutual mutual funds, individuals should consider their financial goals, the different types of mutual funds available, and the fees associated with these investments.

Understand the different types of mutual funds

Understanding the different types of mutual funds is essential when considering how to invest in MassMutual mutual funds. There are generally five types of mutual funds: money market funds, bond funds, stock funds, balanced funds, and target date funds. Here is a detailed overview of each type:

Money Market Funds

Money market funds are considered a safe and stable investment option. They invest in high-quality, short-term debt instruments, primarily government treasury bills, and some corporate bonds. These funds offer slightly higher returns than regular savings or checking accounts but lower returns than certificates of deposit (CDs). Money market funds are often used as a temporary holding place for cash, providing liquidity with moderate returns. However, it is important to note that they are not insured by the Federal Deposit Insurance Corporation (FDIC).

Bond Funds

Bond funds invest in a range of bonds, such as government and corporate bonds, which offer a fixed rate of return. These funds typically aim for higher returns than money market funds and thus carry higher risks. The specific types of bonds held by the fund will influence the level of risk and potential returns. Actively managed bond funds seek to identify undervalued bonds to sell them at a profit, which can lead to higher returns but also carries higher risks.

Stock Funds

Stock funds, as the name suggests, invest principally in stocks or equities. They can be categorized based on the size of the companies they invest in, such as small-cap, mid-cap, or large-cap funds. Additionally, they can be classified based on their investment approach, including aggressive growth, income-oriented, and value funds. Growth funds focus on companies with strong earnings and growth potential but may not pay regular dividends. On the other hand, income funds invest in stocks that provide regular dividend payments. Index funds, a type of stock fund, aim to replicate the performance of a specific market index, such as the S&P 500.

Balanced Funds

Balanced funds, also known as asset allocation funds, invest across various securities, including stocks, bonds, the money market, or alternative investments. The primary objective of these funds is to reduce risk through diversification. The portfolio manager has the flexibility to adjust the ratio of asset classes to maintain the fund's strategy. Balanced funds offer investors exposure to a diverse range of assets while maintaining a dynamic allocation to meet changing market conditions and investor objectives.

Target Date Funds

Target date funds, also known as lifecycle funds, are designed for individuals with specific retirement dates in mind. These funds hold a mix of stocks, bonds, and other investments, and the asset allocation gradually shifts to a more conservative approach as the target date approaches. This type of fund is suitable for investors seeking a long-term investment strategy that automatically adjusts to their changing needs over time.

Know the pros and cons of investing in mutual funds

Mutual funds are a popular investment option. They pool money from multiple investors, allowing you to invest in a wide range of securities and helping to diversify your portfolio and mitigate risk. However, like any investment, mutual funds have their own pros and cons that you should consider before investing.

Pros

Mutual funds offer several advantages, including:

• Diversification: By investing in a mutual fund, you gain access to a diverse range of securities, reducing investment risk. If certain fund assets decrease in value, gains in other areas can offset those losses.
• Professional management: Mutual funds are managed by professionals, saving you time and resources that would otherwise be spent on researching and analysing stocks or bonds.
• Convenience: Mutual funds offer a convenient way to invest in a diverse range of securities through a single investment.
• Compound interest: Mutual funds allow investors to reinvest dividends and interest, enabling faster growth through compound interest.
• Relative ease of investment: With a mutual fund, you can benefit from the expertise of a fund manager who researches investment options and makes trades on your behalf.

Cons

Despite these advantages, mutual funds also have some potential drawbacks:

• Fees and expenses: Mutual funds often come with various fees and expenses, such as load fees, operating expense ratios, and 12b-1 fees. These fees can eat into your investment gains.
• No guaranteed returns: Mutual funds do not guarantee returns, and there is a possibility of losing the original amount invested.
• Market risk: Like stocks and bonds, mutual funds are subject to market risk, including fluctuations in price and potential loss of principal value during market downturns.
• Manager risk: In actively managed funds, the performance of the fund depends on the decisions made by the fund manager, who may make poor or emotionally driven choices.
• Tax inefficiency: Mutual funds distribute capital gains to investors, even if they haven't sold any shares, resulting in taxable events. Additionally, investors may need to pay taxes on dividends and interest earned within the fund.
• Possibly too hands-off: Some investors prefer to be actively involved in trades and investment decisions, which may not be possible with a mutual fund.

Learn how to choose the best mutual fund

When choosing a mutual fund, it is important to understand your financial goals, needs, interests, and unique opportunities. Planning is key to investing, and it is important to regularly adjust your investments according to changing life circumstances.

• Identify your investment goals: Are you saving for retirement, buying a home, or investing for current income? Knowing what you are investing for will help you choose the right type of mutual fund. For example, if you are investing for the short term, you may want to skip stock and bond mutual funds and opt for a short-term vehicle like a savings account or money market fund. On the other hand, if you are investing for the long term, mutual funds can be a good option.
• Decide on an account type: You can choose from a standard brokerage account, a retirement account like a 401(k) or IRA, or a taxable brokerage account. The choice will depend on your specific goals and tax considerations.
• Determine your asset mix: Decide on the percentage of your portfolio that will be invested in stocks, bonds, and other holdings. This will depend on your risk tolerance, investment horizon, and financial goals. For example, if you are in your 20s, you may want to have a stock-heavy or even 100% stock allocation. As you get closer to retirement, you may want to increase your bond allocation to reduce risk.
• Pick an investment strategy: You can choose between "active" and "passive" investment strategies. Active funds aim to beat the market by employing a fund manager to pick out stocks and bonds that will outperform. These funds typically charge higher fees. Passive funds, on the other hand, aim to match market returns by mirroring an index like the S&P 500. They tend to be cheaper and often outperform active funds due to their lower fees.
• Research mutual fund companies: Choose a reputable and well-known mutual fund company, such as Vanguard or Fidelity. Consider the funds offered by these companies and whether they align with your investment goals and strategy.
• Research specific mutual funds: Once you have chosen a fund provider, study their menu of options. Consider factors such as fees, historical performance, and investment strategy when making your decision.
• Consider the fees: Mutual funds charge various fees that will impact your overall investment returns. Be sure to understand all the fees associated with a mutual fund before investing. Some common fees include expense ratios, sales charges or loads, redemption fees, and account maintenance fees.
• Monitor your investments: Once you have chosen and invested in a mutual fund, don't forget to periodically check on its performance. Make adjustments as needed to ensure your investments remain aligned with your financial goals.

By following these steps, you can choose the best mutual fund that aligns with your financial goals and risk tolerance. Remember to seek the advice of a financial professional if you need more guidance.

Research and compare different mutual funds

When researching and comparing different mutual funds, it's important to understand the basics of how they work and the different types available. Mutual funds are investment vehicles that pool money from multiple investors to purchase a diversified portfolio of stocks, bonds, and other securities. The main types of mutual funds are money market funds, bond funds, stock funds, balanced funds, and target date funds.

Investment Goals

Before investing in any mutual fund, it's crucial to identify your financial goals and objectives. Are you investing for the short-term or long-term? Are you saving for retirement, buying a home, or funding education? Your investment time horizon and specific goals will help guide your mutual fund selections.

Risk and Return

Different mutual funds offer varying levels of risk and potential return. Generally, stock funds are considered riskier but offer higher return potential, while bond funds are relatively less risky but may provide more modest returns. Consider your risk tolerance and investment objectives when comparing funds.

Fund Performance and Historical Returns

Examining the historical performance of mutual funds can provide insights into their potential for future returns. However, it's important to evaluate performance over a more extended period and across different market environments, as investment styles can fall in and out of favour.

Fees and Expenses

Mutual funds typically charge various fees and expenses that can impact your overall returns. Be sure to compare the expense ratios and other fees associated with different funds. Lower-cost funds, such as passively managed funds, may offer more cost-effective options.

Investment Strategy and Management

Mutual funds employ different investment strategies, such as active or passive management. Active funds aim to beat the market by employing fund managers who actively select stocks, while passive funds seek to match market returns by mirroring specific indices. Consider the investment strategy that aligns with your goals and risk tolerance.

Diversification

Diversification across asset classes and industries is essential to managing risk in your investment portfolio. Compare the diversification strategies of different mutual funds and ensure they align with your risk tolerance and investment objectives.

Reputation and Regulatory Compliance

When comparing mutual fund companies, consider their reputation and regulatory compliance. Choose well-known companies with a strong track record and minimal regulatory issues. You can review SEC filings on fund company websites to assess their regulatory history.

Professional Guidance

If you're new to investing or unsure about your decisions, consider seeking guidance from a financial professional or advisor. They can provide personalised advice based on your financial goals, risk tolerance, and market conditions.

Find out how to buy and sell mutual fund shares

When you invest in a mutual fund, you buy a share in a portfolio of stocks, bonds, and other securities. Mutual funds pool together money from different investors to buy a collection of securities, typically stocks and/or bonds, which have common investment objectives.

A MassMutual financial professional will be with you every step of the way to help you prepare for the future. During your initial phone call, your financial professional will ask you questions to understand your financial goals and objectives. After looking at your entire financial picture, they will provide you with suggestions to fill in the gaps so you can choose the products best suited for your situation. If you're satisfied with the recommendations, your financial professional will secure the products and services to help ensure your financial future.

Mutual funds can be bought through an online broker or directly through the company managing the fund. Most mutual funds require a minimum investment of a few thousand dollars. Some mutual funds may close to new investors if they’ve grown too large or if the portfolio manager thinks it will be difficult to find attractive investments for a larger fund.

Mutual funds can only be bought and sold after the market closes at the fund’s net asset value (NAV). Mutual fund shares are purchased and redeemed directly from the fund, unlike stocks where you’re buying from another market participant.

Mutual fund investors can buy or sell shares at any time at their current net asset value (NAV). Since it’s easy to enter and exit the fund, mutual funds can be an attractive option, especially when compared to less liquid investments.

Mutual fund shares are sold the same way that they’re bought: either through the fund company directly or through your broker. You’ll receive the next available net asset value as your price for each share sold. You’ll also have to pay any applicable fees or charges.

Frequently asked questions