Benefits of Investing in Mutual Funds

May 16, 2014 Posted by admin

Mutual funds pool the money of different investors to buy securities. In this way it is a collective investment. The money managers invest the fund’s capital. The money that you invest is used to buy stocks and bonds which generates income for you. Investing in funds can give you financial returns if there is a capital gain or even an increase in the price of the fund holding. The dividends on the stocks and interest on bonds can be a constant source of income as well. Besides this, mutual funds have many benefits. A professional money manager looks after the investment of your money. Thus, you do not have to worry about which investment to make. This is most beneficial for novice investors. You do not need to conduct long and tedious research before you make an investment. In this way you can sit back and relax as your money is in the capable hands of professionals. Thus your time is saved and you do not have to lose sleep over your stocks. These professionals have indebt knowledge of economic data and the effects of the world events on your investments. As an investor in mutual funds, you can access and participate in the global markets.

Another benefit of mutual funds investment is that your money is invested in many different bonds, equities and holdings. So, your investment portfolio is varied and balanced. If you had invested your money in only one security, the risks increase. By having a well-balanced and spread portfolio, you are protected from risks. As there are a large number of assets being invested in, if there is a loss in one investment, it is compensated by the gains in the other investments. You can also move and transfer your investment from one sector to another. Should you need to redeem your units, you can do so easily. Mutual funds are liquid investments and you will be able to receive your money in about two working days. Mutual fund companies offer their customers personalized services. You are just a click or a phone call away from an investment specialist. Many banks will help you to choose the best funds to invest in according to your needs.

Despite the benefits, investment in funds also has its risks. They are subject to market fluctuations. Sometimes, the returns are low. It also have annual expense fees. Early withdrawals can be penalised and you may have to pay a fine. Thus, it would be prudent to consider both, the pros and cons before you invest in mutual funds. It is only after you do your homework can you decide if investing funds is correct decision for you.

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