Classic bank deposits currently offer clients minimal interest. One reason is the almost zero rates on the general bank market. Therefore, in combination with inflation, people’s money is lost in value. If you want to earn more, the right-handed mutual funds can give you a helping hand.
What is the Mutual Fund?
The Mutual Fund is a product that invests in assets such as bonds, stocks or money market instruments. The total amount of assets held by the fund is called the portfolio managed by the portfolio manager. In this case, your assets are merged with the assets of other investors and invested together in different assets.
Your investment in the fund is divided into shares. The number of your shares corresponds to a proportional share of the total assets of the Fund, together with the income of the Fund achieves. The fund’s share price fluctuates daily as the value of the underlying assets increases and decreases.
5 advantages of investing in mutual funds
The fund disperses the assets of different industries, countries and regions, and thus offers the benefit of risk diversification. Thus, your assets are not exposed to the risk of a single asset class, thus significantly reducing the overall risk of the investment.
In addition, through collective investment with other investors, you increase your “purchasing power” and get better access to assets and markets than if you were buying securities as an individual investor. However, it should be noted that only the diversification of assets alone does not provide complete protection against market risks.
Easy to use
Normal management of your assets should be as easy as possible. Therefore, the fund manager invests in your interest and informs you through regular reports on how your money is invested. The investor has a choice between funds that pay dividends from the proceeds or funds that reinvest the proceeds (these are recommended in the long term).
Due to the “purchasing power” of unit-holders, mutual funds are usually cost-effective. Fixed costs, such as asset purchase fees, are evenly distributed among all unit-holders and thus broken down to an individual very low. Thus, a portfolio transaction can be made at a fraction of the costs that would be incurred if you were buying an individual investor.
Investment management by professionals
When investing in mutual funds, you can benefit from the expertise of experienced fund managers who have access to important market information. Taking into account the existing analysis and investment approaches, new and interesting investment opportunities can be constantly found. In a change in economic and market environment, the portfolio manager decides which securities to buy or sell in accordance with the fund’s investment guidelines.
Selection of regions and sectors
As a shareholder, you can take advantage of the different investment styles and regions, respectively. industry. You have the choice of global funds that invest worldwide in a number of current market trends, which can help you mitigate the effects of major fluctuations in the capital market. On the other hand, dynamic investors may opt for a particular region where they will be more exposed to both positive and negative developments in this part of the world.
Active fund management is a proven path
There is always something happening on the market. There are markets that are currently growing and there are markets that are currently in decline.
The goal of each investor is to find a security, commodity or fund that has a growing trend ahead. Looking at the development of the financial markets, it is clear that the “buy and hold” strategy is currently not working. Nowadays, efficient investment requires active portfolio management with the ability to respond to market developments that change every now and then.