If someone offers you a way to grow your money, more often than not, you will take them up on their offer. Considering of course that this person is from an organization that handles finances, you will even offer up an amount right then and there. It is such a no-brainer, right? Who would not want their money to increase ten-fold without expending so much effort? Yes, you can always choose to start a small business, but what if you do not have enough for capital? This is why people are leaning more towards investing their money.
Investing is one of the best ways to grow your money, and there are many kinds of investments you can choose from depending on different factors. However, it is completely understandable if you are hesitant to explore investment opportunities, especially after reading stories of people who have risked almost all of the amount they have put in and lost it. But if you think about it, stories like that are very rare. There are easier and less stressful ways of investing, one of which is the mutual fund investment.
In this article, we will explore what mutual funds are and its benefit to you.
Definition of mutual fund investment
A mutual fund is simply a kind of investment made up of a pool of money collected from individual investors or organizations. This collection is handled by money managers whose goal depends on the type of fund chosen by the investors. For instance, if it is a long-term growth investment, it is most likely high risk and its earnings is based on the Dow Jones Industrial Average and beating in a fiscal year.
Before you put money on this, you will be speaking with an adviser, so do not worry about choosing which goal suits your needs and capabilities. They will know how they can help you start with your mutual fund.
Closed-end funds and Open-end funds
Mutual funds is divided into two:
- Closed-end funds – there is a specific number of shared offered to the public. These are traded on the open market and are subject to the laws of supply and demand. This just means that investors cannot redeem their shares and they will not be issued new ones. These shares will be traded at a discount to net asset value.
- Open-end funds – there is no specific number of shares that is offer to the public. Most mutual fund investments fall under this type. An investor can be issued new shares based on the current net asset value and will be able to redeem shares if they decide to sell. The open-end funds are further divided into two:
- Load – involves sales commissions to be paid on top of the net asset value of the fund’s shares.
- No-load – lower expenses and has a higher return for the investor
Why choose mutual fund investment?
Its highlighting features is its accessibility. Because it is easier and less stressful to make than most, even kids who have saved up their allowance can start with their mutual fund investment so that their money can grow while they are still in school. Moreover, there is a dedicated manager whose job it is to focus on your investment, they do everything from calculating to analyzing. So you really just have to inquire, put the money in, and ask for updates every now and then.
This is the perfect kind of investment if you just want to try it out. You can go to your financial adviser now and ask about mutual fund investment so that you can start growing your money with a hassle.