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What and why to invest in Mutual funds

Planning for safe investment policies? Are you looking for several ways to save your money? If your answer is yes. Then mutual funds can be your one-stop solution. In fact, mutual funds are cheaper and convenient. If are hesitated to directly invest in the stocks, you can simply go for investing in mutual funds.

what are mutual funds?

A mutual fund is a pool of money collected from many investors and again invests the money in other services such as stocks, debts etc., All the combined holders of mutual funds is known as a Portfolio where an investor tends to buy a share which generates the ownership of the investor thereby generating his income.

Mutual funds are the do it yourself type of investments. You can professionally manage your money. The schemes of the mutual funds are managed by an asset management company (AMC) where a fund manager manages all the portfolios depending upon the changes in the market to generate money for the investor.

Mutual funds are like low hanging fruits. You can easily choose a plan and start to invest. The fund manager levies the extra charges to govern the portfolios of the investor. This extra charge is known as the expense ratio. No worries these extra charges need to be paid for only once a year.  To generate sufficient money for the investor, a fund manager makes money by performing regular interests and capitals calculations. You can either choose a growth option or a dividend option to reinvest your capitals.

Before, investing you need to know the types and benefits of mutual funds.

Types of Mutual funds

Mutual funds fall into four categories each with different features, risks and benefits.

Money market funds

These can be invested only in high quality and short term investment. The investments are usually issued by U.S corporations, local governments and federals. Money market funds have a low risk when compared to other types of funds.

Bond funds

The ultimate aim of bond funds is to get the highest returns possible and so these are subjected to higher risks. The name itself states that this type of funds is composed of different types of bonds with the higher risk and benefits which may change with mutual funds performance in the market.

Stock funds

If you really want to invest in stock funds, you can invest in corporate funds. But there are different stock funds available each with different rewards and risks

  1. Growth funds target the funds that may not be applicable to regular dividends but with higher financial gains
  2. Invest funds search and invest in the stocks with the regular dividend
  3. Index funds route the market indexes
  4. Sector funds invest in a specific industry

Target-date funds

Also known as lifecycle funds. It is a mixture of all the investments, stocks and bonds. And they change when a funds strategy changes. Wait, are you the one haunting for your retirement. If you said yes, you can choose target date funds are they are specially designed for the one with a retirement plan.

Then a question pops up in your mind. Why invest in mutual funds?

Convenience

Convenient with very less paperwork and monitoring. You get exposed to the broad market and the investments depending on your requirements. Keeps your returns on the track by a switch between the funds and the portfolio

Low investment

You can get started with the low investment mutual fund portfolio. You can either invest in the bulk or choose a systematic investment plan. But all the benefits are assured with the systematic investment plan

Save tax costs

Mutual funds can actually save you the tax costs. Under the selection 80c, there is a tax deduction on certain investment plan and one of them is mutual funds.

Professional fund management

As earlier said mutual funds are professionally managed by a fund manager with a group of researchers. He designs all the investment strategies and adjusts your investments according to the strategy. A fund manager has vast investment skill than retail investors.

Kick off the fraud

No fraud games. Each mutual fund must be filed in a prospectus and the shareholder’s reports in SEC.

Benefits of mutual funds

Diversification

You can mix up your investments and assets in a portfolio to reduce the risk. A diversified portfolio is safeguarded with security. A mutual fund can offer you a wide diversification than individual securities.

Simplicity

Mutual funds are easy to understand you don’t need any experience in economics or a financial statement to be a mutual fund investor.

Easily Accessible

Mutual funds are easy to purchase without offering any special efforts. They are available in mutual fund companies, banks, online discount brokers and investment companies.  Choose the right platform and start investing.

Affordable

Mutual funds have low investment minimums with less than $3,000. In case if an investor switches to the Systematic investment plan with a fixed amount and shares then the value can be as low as $1000.

Flexible

You can either choose to invest in one fund or in a variety of funds. Automatic deposits, withdrawals, dividends, long term and short term savings with the different strategies make mutual funds the hero of all the investments.

Mutual funds are smart and easy investments. These are the saviours for most of the investors with low taxes. You need to be careful while choosing a mutual fund plan which must align with your customers.

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