Have you ever thought of looking into ways to let your hard-earned money grow? Do you have second thoughts of investing into something you’re not certain of? Or do the unknown possibilities in the future thrill you? If you answered YES to these questions, then investment in mutual funds is something that might interest you.
But what is it and how does it work?
- MUTUAL FUNDS is a professionally managed type of investment that trades in many different holdings.
- It collects money from several investors and all the money they put together is then invested in various securities such as stocks, bonds, other assets and short-term debts.
In a general sense, investing costs a lot. You cannot just buy stocks at a lower price and come as you are as an individual investor and find yourself too small in the big world of investment.
Why is it professionally managed?
It is professionally managed simply because money is a big issue – and that fund managers pools money from various investors to purchase securities. In simple terms, mutual fund is the company that does the work – they pool money from all the individual investors and they do the job of investing them in various forms. The combined amount, called the portfolio, is what is being shared and bought in the trade. While you can go on and push buying funds as an individual investor, mutual funds assure a safer and guaranteed return because they are diversified investment.
With mutual funds, your investment is actively managed, hence giving you professional stock picking and portfolio management advantages.
Much to say with the pros, there are also certain things worth to note:
- It takes time to research and understand how the scheme works. As much as you want to always grow your investment, it is inevitable that the managers of funds change – which is basically out of control. If then, it could affect the performance and growth of your funds even if other factors remain untouched. Everything relies on the expertise and skill of the fund manager – that you never know of. All the while, fund managers have different perspective on things. You can never tell which stocks you are buying as it will not directly reflect current stock ownership and control. In other words, your growth greatly relies on the fund manager’s fingertips.
What’s the EDGE?
MUTUAL FUNDS is guaranteed safe and secure compared to other investment forms. As an investor, you should not be worried on short-terms fluctuations because investing in long term ensures bigger returns. Indeed, mutual fund serves as a financial vehicle that drives your finances all the way up to the ladder of growth.
So, how does one start investing? Looking into the various types of mutual funds will help you decide which type of investment is most suitable to your taste.
- EQUITY FUNDS focus on stocks and other equivalents, as it is the most volatile because its values sharply rise and fall in a very short span of time.
- FIXED INCOME MUTUTAL FUNDS are found to be more secure as it is anchored on government treasuries or corporate funds which are fixed and more strengthened.
- MONEY MARKET FUNDS on the other hand are short-term investments in high quality debt instruments such as corporate bonds from government, banks, corporations or other more established companies. But if you cannot decide yet which one to go for, then a balanced hybrid could be an option as it is a combination of any types mentioned.
Since mutual funds are managed by many, these companies also handle and own hundreds of funds. Some of the most known mutual fund companies in terms of their size include Vanguard, Fidelity, American, Barclays, Franklin Templeton, PIMCO, and many others. Since they have been making changes in the global market, it is said that mutual funds have become an essential component in the growth of the economy. The growth of the mutual fund is said to directly reflect how your industry or economy is doing – as it does change rapidly in a daily basis.
Investment is but a big word. However, we can never appreciate and understand if we just keep our finances inside the box. Investment indeed has become a major trade, and taking the risk might hurt, or might NOT.
Fund Break
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