Mutual funds are supervised and managed by trained professionals in financial sector. Based on conditions and the other factors prevailing in the market, the fund manager will decide what is the right time to buy and sell securities. Tracking a mutual fund requires diligence, time and good knowledge about the fundamental and technical analysis. This cost of managing numerous securities is dispersed among all the investors in accordance with the amount invested to buy those shares. So fund manager has more money to research more securities in depth than of the average investor.
One of the benefits in investing in mutual funds is that it will diversify your investment in various sectors which are available in market. By doing so will help the investor of risk of losing money invested. For example, a stock mutual fund, invests in many stocks in various categories. This minimizes the risk attributed to a concentrated position. If few securities looses its value than it will be compensated by rise in the value of other securities. Further diversification can be done by investing in multiple funds which invest in different sectors to minimize the losses.
Liquidity: Mutual funds are known as one of liquefy investment. This means if investor are in urgent needs of cash than he / she can redeem the units which are being bought for amount invested. Orders are not executed until the closing of market when the NAV (Net Asset Value) of the fund can be determined. Fees or agreements are based on the type of mutual fund which means their exit policy which is stated when the investor applied for fund.
Obtaining information about fund, buying and selling can be accessible by telephone, by email, or online. An investor needs to evaluate a mutual fund investment based on the goals and risk tolerance before making a decision of buy it. The prospectus needs to studied very carefully before investing in any fund.
Can be started with small initial investment:
Investment in most of funds can be done by small initial investment and based on the performance of the investor can later increase the amount invested if he / she wants too.
No Personal Liability:
Funds involve no personal liability beyond the investment risk in the portfolio. Thus, it is possible for investors to actually lose more money than invest if they are doing investment in different other forms like primarily in partnerships and futures which requires investors to sign papers wherein investor is agreed to accept personal responsibility for certain liabilities.
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