Monday, 22 May 2017

Important Things to Know Before Investing in a Mutual Fund

Investment

When we are told that we can grow our money without worrying too much, the question we ask is how we could sign up for it right away. Of course, anything that involves money is not going to be too simple, albeit, there are ways in which you could earn with less the stress. It is called mutual funds investment, and more and more people are dabbling into it. 

Investing, in general, is one of the best ways to grow your money. There are different ways to do it, too, and you can choose based on your preferences and how much you are willing to risk. Naturally, investing is a risk, just like opening a business. That hesitation and fear you are feeling are understandable, and it is actually part of the investing journey. But there are ways to avoid being at risk, and the first step is knowing what mutual fund investment is. 

This article will explain how mutual funds work and how it can benefit you when you start investing.
What are mutual funds?

Mutual funds is an investment that is made up of a pool of money, and yours will be collected to take part in it. The money can come from individuals or organisations. The type of mutual funds that will be chosen for your pool will highly depend on your financial goals. There are long-term growth investments, and there are short-term growth investments where each involves a certain level of risk.
Before you start putting money in a mutual fund, you should speak with an adviser. Your bank probably offers mutual funds, and you can directly invest in your bank if you choose to do so. But if you want to have different options, you can look for official investment associations or organisations whose job is to look at investment lists. In any case, you should have a financial adviser or an investment coach to help you decide based on your goals and needs.

Closed-end funds vs. Open-end funds
Mutual fund investment is further divided into two:

A closed-end fund is when there is only a specific number of shares offered to the public. These are traded on the open market and are influenced by the laws of supply and demand. Investors will not be able to redeem their shares nor will they be issued new ones.

An open-end fund is the opposite; there is no specific number of shares offered to the public. The majority of mutual funds fall under the open-end funds. As an investor, you can be issued new shared based on the current net asset value, and you will be able to redeem shares if you decide to sell. 
Open-end funds are subdivided into two:

Load means there is a sales commission involved on top of the net asset value of the fund's shares. 
No-load is when there are lower expenses and a much higher return on investment.

Benefits of mutual fund investment
The main feature of mutual fund investment is its accessibility. You do not need to have a huge amount of money to start. Additionally, there is a dedicated fund manager who will devote their time focusing on your investment portfolio, all you need to do is to monitor its performance every now and then. Of course, this does not mean you should not collaborate with your managers, but the burden of responsibility will not fall on your shoulders. 

If you want to try out investing, a mutual fund is a good place to start. Remember to do your research and ask your financial adviser lots of questions. This will give you a much clearer idea of what happens to your money once the investment starts.


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