Is Investing in Mutual Funds a Good Idea?

Posted by Grace under Investing on September 23, 2015

Is investing in mutual funds a good idea or investing in mutual funds is just a waste of time since you can invest your money by yourself. Many of us wants to succeed in investing. We want to make sure that we choose the right investment vehicle. Mutual funds investing is one of the many types of investments we can try to make our money grow. Today, let me answer the question of the reader of InvestmentTotal.com asking if investing in mutual funds is a good idea or not.

I invests money in mutual funds few years ago, I borrowed some amount of money around $5,000. In one year, my funds (equity mutual funds) earned 10% which is good enough. Why I said good enough? It is because an investor is doing great in his investing activities if his average return on investment is around 7% per year. Let me share to you my experience in investing in mutual funds.

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Experience in Investing in Mutual Funds

I get a salary loan from a financial institution. The company grant me a loan with an interest of 7% per year. I know it is very high interest. I invests the money I borrowed in a mutual fund. I took risks because I know 7% interest is quiet high. What if my funds only earned 6%, that means I loose 1%.

But what if my funds gained 10% or more, that means I make 3% of the borrowed money. I make 3% without doing anything. In mutual funds investing, all you need to is to ope an account, choose a mutual fund type and decide when you want to redeem your investment funds.

Also, it is advisable that you should read and review the prospectus. And do not forget to consult with a certified financial planner. Ask your financial planner to assess your risk appetite.

Question: Is Investing in Mutual Funds a Good Idea?

For me investing in mutual funds is a good idea for very busy people. Investing in mutual funds is good for investors who have no time to know the market frequently. It is also advisable for those people who have little knowledge in investing in different types of investments such as stocks, bonds and money market funds.

One of the advantage in investing mutual funds is that you can perform diversification instantly. You can also do asset allocation instantly. Since mutual funds has different types of funds, you can allocate your or transfer your funds according to the asset allocation strategies you are following.

Say for example, you are 45 years old now and you can’t afford to take high risk types of investments. If you have mutual fund equity type (stocks), you can redeem your funds and invest in bonds easily. Or you can choose both stocks and bonds by investing in mutual fund balance fund. Balance fund is the combination of high risk and low risk investments like stocks and bonds.

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