A manager takes care of the money invested by individuals and further invests it in various businesses. As those businesses flourish and make profits, so do you. The process is called investing in Mutual Funds. It offers people a chance to invest their money without actually getting into the hassle of tracking it.
Besides this, there are other significant benefits of mutual funds too:
Management under proficient investorsProfessional management is another benefit that comes with mutual funds. A group of people collectively and mutually entrust one person with all their money and call him their investment/fund manager. The investment manager then does a thorough market research and puts the money entrusted to him in a diverse number of businesses such as stock market, small potential businesses, buying shares of different companies, and so on.
Risk mitigation through diversificationMutual funds also offer investors with diversification. With this technique, it is possible to minimize risk and maximize profits. The diversification provides a safe haven because even if one investment doesn’t pay off well, then you have a limited amount of money at risk. This is unlike the investments where the investor puts on stake his entire savings into just one business activity. With mutual funds, there is less risk and a high chance of profits because it is highly unlikely that you encounter a loss in all of the places or companies where your manager invested the money for you (given that your manager is learned and well experienced with the market).
With mutual funds, an investor is often presented with a large number of different types of businesses where they wish to invest their money. To name a few— bond funds, stock funds, sector funds, money market mutual funds, such as debt and balanced funds.
Ease of liquidityLiquidity of funds at any given instant is yet another benefit these funds offer. Once invested you are given units in the funds based on the amount of money you have invested. These units are easily redeemable. This means that you have complete right and authority to liquidate your funds. Net asset value represents the value of each unit after all fund management fees are paid. Multiplying the NAV by the number of units gives you the amount of your investment.
Going big with your investmentsLast but not least, mutual funds may even present you with the opportunity to invest in larger businesses where opportunities may only be available to bigger or institutional investors.
These advantages allow you to make an easy and efficient investment of a lump sum all through a systematic investment plan and by professional means.
Dr. Victor Chukwuemeka
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