What are the benefits of mutual funds?
• I. Diversification: Most mutual funds own dozens or even hundreds of securities. The managers often allocate the fund’s assets over more investments (i.e., stocks and bonds, and/or stocks from a variety of industries). This gives investors less exposure to market decline than had they bought a few individual securities. If some of the funds holdings perform poorly, they may be offset by some doing well. • II. Small Investment Amounts: Depending on the fund family, you can open an account and make subsequent investments with as little as $50. You can even setup automatic investments through a transfer of funds from your bank account. • III. Liquidity: You can convert your mutual fund investment into cash (i.e. redeem your shares) by making a request to either your broker or the fund company directly.
Benefits of investing in funds include: • Access to global investment opportunities: Your investment horizon can be broadened because there are different types of funds that can provide a convenient and cost effective way to capitalize on both local and overseas investment opportunities. • Diversification: Diversification may take different forms, e.g. along geographic or industry lines, or amongst different securities or issuers. The essence is that by investing in securities that have a low correlation, a portfolio can help you spread out the risks and achieve a better risk-return pattern than individual securities. • Access to professional investment management services: You can enjoy the services rendered by fund managers. Fund managers research and analyze the markets and securities for the funds. Fund managers will determine which securities to hold, when to buy and sell.
Benefits Mutual funds offer two key benefits: diversification and professional management. Diversification means owning many different assets at one time. Mutual funds offer instant diversification because each fund, or basket, owns multiple stocks, bonds and so on. When you buy a piece of the fund, you essentially buy a piece of every asset held by the fund.> Professional management means that somebody who spends a lot more time analyzing financial markets than you do will be helping you invest your money. Now that you know what the benefits of mutual funds are, what types of mutual funds are available?
• Convenience: Investors who have the time and the money can build their portfolio by buying one security at a time. But identifying, researching and monitoring securities can be a full-time job that requires a lot of commitment. Alternatively, investors can simply buy a mutual fund in the market that will save them a lot of time and regular monitoring of the performance of the individual securities that make up the fund. • Diversification: A single fund can hold securities from 100s of different issuers or companies, far more than what an individual investor can realistically manage to hold in their individual portfolios. This diversification reduces the risk of a loss due to problems in one particular company or industry. • Professional management: A mutual fund is managed by professional investors who do this full time.
Mutual funds have several important benefits. Here are the main ones: • Professional management When you invest in a mutual fund, you benefit from the expertise of a professional manager who has training and experience in the field of investments. Professional managers and their teams of analysts also have the time and resources to thoroughly research potential investments. • Diversification Because they pool the money of many investors, mutual funds can invest in many more securities than individuals could on their own. Diversification lessens the risk that your investments will lose value. By holding many investments at once, there’s a good chance that some will rise in value while others fall. • Convenience Mutual funds save you from having to research, track, buy and sell many individual securities. They are simple to buy and redeem, and easy-to-understand statements are provided to you. • Easy access You can buy and sell units of a mutual fund at almost any time.
