Advantages of Investing in Mutual Funds

By Guest Author

“What are the advantages of investing in mutual funds? I am newbie investor and I believe mutual funds, stocks and real estate if they are combined, I will accumulate more money. I am willing to take risks and I choose mutual fund equity type.

Share some advantages of investing in mutual funds in your blog (InvestmentTotal.com). I am Ramgen from Alberta, Canada”.

Mutual funds investing is a great way to invest effortlessly. What I mean about “effortless investing”? When you are investing in mutual funds, someone (a fund manager) will invest the money for you. A mutual fund company will raise money from shareholders and invest the funds in a lump sum. The mutual fund company will give the shareholders an opportunity to pool their money and buy stocks, bonds and real estate.

Advantages of Investing in Mutual Funds

Here you will get an idea why investing in mutual funds will be very beneficial to you and to other investors. Personally, I choose mutual funds because of diversification.

Diversification

When you invest in a fund, your money is invested in a large number of securities. Say for example, a equity mutual fund has different types of stocks from different industry. That way, the funds are minimizing the risk, so, your money, too.

Liquidity 

You can easily turn your shares into cash. Just sell your shares. When is the right time to sell mutual fund shares? Just like stocks or any other investments, sell your shares when you think you already make a profit.

Fund to Fund Arrangement

Assuming you are now a 25 year old investor. You can afford to take risk. Therefore, you can choose high risk mutual fund type such as equity mutual fund. When your age changed, (you’ve turned 35 or 45), you need to take less risk. A balanced fund will be right for you. Also, before you retire, make sure you money is in low risk because you will no longer afford to take high risk. A low risk such as bond fund will be right for your age.

In mutual fund investing, it is easy to invest your money and transfer your investment to another funds with the same mutual fund company is very easy.

Advantages of Investing in Mutual Funds

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Other Advantage of Investing in Mutual Funds

Low-Cost Management

For as low as 1% to 2% professional management fees, you have now someone (a investment experts) do the investing for you. That way, you are doing some kind of “leverage investing”, which means you are using other people’s time and skills to make money for you.

Tips and Warnings

Although there are many advantages of investing in mutual funds. You should be aware that not all mutual fund type is good for your risk tolerance. Some mutual fund type might help you achieve your financial goal.

But, most of the time, even if you think equity mutual funds are high risks that gets high return, you need to search and investigate which companies has that kind of funds that are performing well.

If you know other advantages of investing mutual funds aside to diversification, low cost management fees, liquidity and flexibility, do share your ideas and comments below.

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