So what do you need to know about mutual funds?

A mutual fund is a pool of investments—usually a combination of stocks, bonds, and cash instruments. They are bought and sold by an investment company based on the goals of the fund. The risk, size of the company and industry are all things the fund manager thinks about when making investment decisions.

When you put money in a mutual fund, you’re basically buying a small amount of each investment in the fund’s portfolio. You’re counting on the company that creates the fund to investigate industries to invest in based on the fund’s investment strategy and decide which ones to invest in.

Now that you know what a mutual fund is, check out four of the most common types of mutual funds:

• Stock mutual funds
• Bond mutual funds
• Money-market mutual funds
• Target-date retirement funds

Investors should consider a fund’s investment objectives, charges, expenses, and risks carefully before investing. More information about the fund is available in the prospectus, which should be read carefully before investing.

Keep reading to learn more, or click here to contact an Allstate Financial professional for help.

One well-known investment strategy is to have a diversified portfolio. Diversification does not ensure a profit or protect against loss in a declining market, but if you own several investments and one of them is performing poorly, the other investments may help cushion the impact. Mutual funds can help take out a lot of the leg-work needed to diversify by selecting numerous investments.

Purchasing several mutual funds in different asset classes adds another level of investment diversification. You could have one mutual fund that contains lower-risk investments that can help preserve current value, and another with higher-risk investments that can help maximize potential growth. You could invest in general mutual funds or funds with a specific purpose—like target-date retirement funds.

And if you’re looking for tax advantages, you can also invest in an IRA invested in mutual funds or an annuity.

Keep reading to learn more, or click here to contact an Allstate Financial professional for help.

Most important, they simplify investing for the average person, who doesn't have time to research every stock and bond out there. They're managed by professionals/investment managers who often charge just a small fee for their work.

Each mutual fund typically invests in a number of different companies, which can help make your investment less risky than had you only invested in a single company’s stock.

Even better, mutual funds are created with certain goals in mind. That means you can pick funds that fit your investment comfort level and time horizon. So if retirement is right around the corner, you may want to select a fund that takes less risk, such as bond funds or money-market funds.

There are also funds based on what year you'll retire, called target-date retirement funds. They are invested so that your investment can potentially grow a lot at the beginning but then be less risky when you're older.

Mutual funds are low-maintenance—always a plus. Every year, the fund company sends you a report on how it's doing and what it's investing in. You can also track its progress easily on the web.

Keep reading to learn more, or click here to contact an Allstate Financial professional for help.

• People who want a simple way to make sure their investments are diversified
• Those who invest their money in smaller chunks
• Those who don't have the time to research individual stocks and bonds
• People who want to be able to access their money easily without paying extra fees

Keep reading to learn more, or click here to contact an Allstate Financial professional for help.