| Mutual fund research |
| Written by Antione Grey | |
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What is a Mutual Fund? A Mutual Fund is money collectively invested by a group of shareholders, and managed by a professional money manager. All parties involved in the Mutual Fund equally share any increase, or decrease, of the fund’s value. Most Mutual Funds involve buying and selling of bonds, stocks and shares. One of the main advantages of a mutual fund research is that the members don’t need to make important decisions. These are left to the money manager who has been professionally trained to seek out good returns for clients. Therefore, the money manager is a key person in a Mutual Fund scheme. When investors combine their money, this forms strong buying power, which means that you are likely to see a much higher return on your investment than if you were on your own. When investing in a Mutual Fund, your cash remains liquid, thereby enabling you to sell, or buy, shares at any time. If you intend to sell, inform your money manager who will carry out the entire transaction. In fact your money manager will contact you if he/she deems it a good time to sell shares. Selling shares occurs when the price a particular shares has reached a good point of profitability for the investors. Mutual Funds can be bought in a variety of ways. The funds are either ‘no load’ or ‘load’ fund. This simply means that a ‘no load’ fund does not carry a sales commission, while a ‘load’ fund does. Sometimes a ‘no load’ fund may carry a very low commission. If you buy a ‘no load’ fund you will be required to complete all the application forms yourself. Investors who choose ‘load’ funds use a broker to do all the preparatory work on their behalf, and are quite happy to pay a fee for this convenience. There are two ways to invest in Mutual Funds. The first is in the form of a lump sum. Certain financial institutions impose a minimum amount on lump sum investments. The other method is known as ‘automatic’; this is when the financial institution permits you to invest money on a regular basis. Investors choosing the automatic system benefit with ‘dollar cost averaging’. This basically means that if you are investing $150 per month, you will benefit from the market’s ups and downs. This can be explained in more detail by your money manager. Exchanging shares with other investors is another facility available to Mutual Funds holders. The only pre-requisite being that all shares involved in the exchange must be owned by the same financial institution. How does a mutual fund make money for you? Your shares can go up in value; this is called appreciation, and is often a good time to sell. However, the shares can also go down in value, in which case they depreciate, and you will have to wait until the price rises before you consider selling. Many shrewd investors wait until shares plummet, then gobble them up at rock-bottom prices, knowing that ultimately they should turn a healthy profit. Your Mutual Fund can also pay dividends earned from stocks and bonds. This money is shared equally among the shareholders. Dividends can be paid every month, every quarter or annually. Then there are payments known as capital gains. When your money manager sells on the fund’s behalf and makes profits, this is known as capital gains. Like dividends, capital gains are paid to shareholders on mutually agreed time frames during the year. When it comes to choosing a Mutual Fund to invest in, one should be cautious and make the selection wisely. Find out how the fund has performed in the market, and establish how it has increased, or decreased, in value since its beginning. The Mutual Fund industry measures a company’s performance by a relevant ‘yardstick’, known as an index. You should also find out the company’s average annual return; this is very important as it prevents a company from showing its good years, while hiding the bad years. An average annual return will reveal results of each year, and show an annual average for the number of years the company has been in business. Is there a risk involved in a Mutual Fund? Mutual Funds are generally considered to be low-risk operations because of their high level of diversification. However, the main risk involved is obviously losing your money. Another risk is not achieving your financial goal. For example, you may have chosen to invest in the fund to pay for a child’s college education, only to discover that investing in a Mutual Fund was not suitable for this purpose. The upside of investing in Mutual Funds is the simplicity. |
