Can I Open a Mutual Funds Account While Unemployed?

Mutual funds have the advantage of diversification. Mutual fund managers supply the funds with a wide variety of securities, such as stocks, bonds, money market funds and other investments. The diversity in a mutual fund investment provides low risk. While one asset class might perform poorly in the market, securities in other asset categories may perform well. The large mix in a mutual fund, perhaps from thousands of different investments, makes it likely the fund's value will increase despite overall market trends.

Many people who have lost their jobs spend much of their unemployment period tightening up on spending or avoiding taking money from their investments. They might be desperate enough to withdraw cash from their 401(k) or IRA retirement accounts before age 59 1/2, which will cost them income tax on their earnings plus 10 percent federal tax penalties, CNN Money notes. But if you’re lucky enough to have money on hand, perhaps from a severance package or having enough saved in the bank, you can open a mutual funds account with as little as $1,000 or perhaps less. Some funds allow you to pay $50 a month if you agree to invest a certain amount in the fund each month.

Attractive funds during uncertain economic times include mutual funds that invest in government, corporate, municipal and foreign bonds, according to analysts at Forbes.com. Bonds remain relatively safe and earn interest. They have low returns but stay reliable during a down market. Blue chip stocks, which include well-established and financially sound companies, usually provide low risk with good returns. But with the wide range of securities in most mutual funds, you have a good chance of making money during your jobless period.

Of course, if you already have an IRA, which often contains mutual funds, you could put money there. Or you could roll over your former company's 401(k) into an IRA to add to the mutual funds. Discuss your situation with your financial adviser. Research particular mutual funds from market reports in newspapers or online. You can find the daily performance of each fund and how well it has done for the past year or past five years by looking at the fund’s website. Make sure this is the time you want to invest. You might want to hold onto a certain amount of your savings until your next job comes along. But if you have money to invest now, it could provide you with more savings during an unfortunate period in the future.