Saturday, December 16

Mutual Fund

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Why Should I Invest in a Mutual Fund when I can Invest Directly in the Same Instruments :

We have already mentioned that like all other investments in equities and debts, the investments in Mutual funds also carry risk.  However, investments through Mutual Funds is considered better due to the following reasons :-

Your investments will be managed by professional finance managers who are in a better position to assess the risk profile of the investments;

Your small investment cannot be spread into equity shares of various good companies due to high price of such shares.  Mutual Funds are in a much better position to effectively spread your investments across various sectors and among several products available in the market.   This is called risk diversification and can effectively shield the steep slide in the value of your investments.  

Thus, we can say that Mutual funds are better options for investments as  they offer regular investors a chance to diversify their portfolios, which is something they may not be able to do if they decide to make direct investments in stock market or bond market.  For example,  if you want to build a diversified portfolio of 20 scrips, you would probably need Rs 2,00,000 to get started (assuming that you make minumum investment of Rs 10000  per scrip).  However, you can invest in some of the diversified Mutual Fund schemes for an low as Rs.10,000/-.

Everybody today seems to be offering mutual fund investment advice to everybody else. They all swear up and down on whatever system or method they use, or whatever they heard or read about elsewhere. Who can you really trust, and what can you really make of all of this? Put all of the contrasting mutual fund investment advice aside and instead focus on narrowing down your options to find something that’s a great fit.

People always seem to be asking who is the best company for mutual funds? Which company has the best mutual funds guaranteed? The answers to these kinds of questions can become complicated, because certain organizations might have a great option in one category, and other groups may have great options in others. No one, single organization truly stands hands down above all of the others.

There are a ton of great, recognizable and trustworthy names that deliver high returns to their clients and investors. Some of these companies include Charles Schwab, Vanguard and T. Rowe Price. Other big names include American Funds, Meridian, Wells Fargo and on down the line. There are plenty of options that are available in terms of the organization in charge, but more important is finding a fund that you are actually interested in.

For example, many investors today like to minimize their expenses and their fees. To do this, they choose index funds as opposed to standard, managed mutual funds. Because they aren’t being actively traded – you have the entire index – you get to sit back and enjoy the growth while avoiding extra costs. With managed funds, you hope to beat the performance of the entire index or whatever segment of the index you’re invested in, and hope that the improved performance covers the added fees.

You’ll be collectively purchasing shares from a wide variety of stocks, bonds and other investment outlets in order to maximize your potential. Some analysts feel that index funds are simply better due to their simplicity and expected steady growth, while minimizing expenses. Of course, many other analysts disagree.

You can choose mutual funds that are entirely composed of stocks, also known as equity funds. You can also choose bond funds or money market funds, and you can even use ETFs, or exchange traded funds. The individual shares of the fund itself can be traded on the open stock market with these, adding a new level of potential growth and profitability, as well as complexity.

So is there one group or business that can promise you much more than any other? In the majority of cases, no, there isn’t. You need to find an organization that offers you the kind of mutual fund that you’re interested in. Think about the risk you’re willing to take, the length of your investment, whether you want managed or index funds, ETFs or anything else and you’ll begin to see what’s really out there. Mutual fund investment advice can only take you so far, after that you have to make a choice based on what you really want.

Lee Andersons was born in New York, New York where he was raised in the corporate business environment where both his parents were involved. After inheriting a substantial part of the business, Lee decided to expand the business horizons by traveling to Europe and the Far East. Privileged with enough time to spend with his family, Lee spends the rest between over-viewing his business interests and his other passion, writing.


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