Friday, April 30, 2010

Mutual Funds - An Effective Investment Scheme


A mutual fund is a pool of money from various investors which are managed professionally by a fund manager for the purpose of trading or investing the money regularly and distribute the profit or loss to the investors. Mutual funds are one of the investment portfolios of the financial industry. The banking industry invests hugely to mutual funds. Knowing about mutual funds is a good advantage for anyone who wants to build a solid financial future. Investing in mutual funds means purchasing shares and ideally accumulating it to one’s advantage. It is just like buying a lot in square meters at a price, and when the lot price increases, you may sell the lot to gain profit. When the price goes down, you may defer selling it. In mutual funds, you buy shares at a price, then redeem (or withdraw) it when the price per share goes up. That is investment.

Types of mutual funds

There are mutual funds which are aggressive, some are conservative and others are balanced. Aggressive types include equity funds, stocks, etc. These are the funds which go up very fast, and go down very fast too. Conservative funds are those that go up very slowly, but not fast in going down. Examples are the bond fund, government securities and treasury bills. Balanced funds are the combination of both aggressive and conservative. Which fund to choose, depends on what kind of an investor you are.

We can minimize the fear of risk in investing in mutual funds if you know exactly its nature and trends. Enough knowledge of the investment portfolio always clears doubts and lowers the risk. Even aggressive funds can work to your advantage if you strategize on making the most of it. One of the most effective way to invest is buying shares in regular basis. Regardless of what price the shares are. The purpose of this is simply to accumulate the number of share. Given enough time, profit gained can be very high upon redemption.

Accumulate Money For Retirement

Becoming an expert in mutual funds is a great advantage. It can help maximize even a small amount of money to become big. It is worth studying and knowing. The good thing about mutual funds is that people of all ages – young and old alike can participate in the investment.

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