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Wednesday, July 20, 2011

7 Primary Reasons to Invest in Mutual Funds


7 Primary Reasons to Invest in Mutual Funds

A mutual fund or an open-end fund is an investment instrument that raises money from several investors. These companies then invest the money in bonds, stocks and assets.

The 7 primary reasons to invest in mutual funds are given below:

1. Liquidity: One of the primary reasons to invest in mutual funds is liquidity. You may sell your units whenever you’re in need of money. If you wish to sell your units, then you just have to inform your broker about it.

Your broker will sell your units by the end of the trading day unlike in the stock market when you sell your stocks at your given price, the buyer should also be willing to buy at your price.

2. Professional management: Most of the individuals don’t have a thorough knowledge on stocks and bonds. Because of the lack of knowledge, several investors make costly mistakes. Fund portfolio managers can help you in this respect.

They do all the necessary homework and make investment decisions on your behalf. Look their past performances for guidance.


3. Broad range: Mutual fund companies invest in various kinds of securities like money market, equity, corporate bonds, government bond funds, etc. Hence, you can choose a fund according to your suitability.

You can easily get information on these securities from financial magazines, credit unions and over the internet.

4. Don’t need huge capital: Unlike stocks, you don’t need to have a huge capital to invest in mutual funds. You can start with as low as P10,000. Some mutual fund companies will even permit you to start with just P5,000. You only need to keep aside a small amount of your gross monthly salary for investment

5. Diversification: As it has already been mentioned, investment companies make investments in loads of companies in various industries.

If the price of one stock falls, then it doesn’t mean that you’ll loss money. The reason is the price of stocks of other companies is likely to go up. Therefore the risk factor is less.

6. Flexibility: The mutual funds are normally provided by management companies. These companies sponsor various funds. Hence, it becomes easier for you to transfer your hard earned money between funds. So, you may adjust your investments according to your wish.

7. Earnings: The history will speak for itself... Returns that beat the inflation.

For more info... click here... Types of Mutual Funds 

Finally, if you want to retire wealthy, then you can think of investing in mutual funds. You don’t need to be a financial expert to invest in mutual funds. Fund managers are there to help you.



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