Stories by Omodele Adigun
Over the years, mutual funds have made a name for being one of the simplest and most affordable ways for individual investors to realise their short, medium and long term investment goals.
Investing in a mutual fund is easy and rewarding and by learning more about them, a new investor is able to take the first step towards reaching their financial goals.
What is Mutual Fund?
A Mutual Fund is an investment vehicle that allows you, an investor, to combine your money with that of other investors seeking a similar investment outcome, and have a professional investment manager use their skills to manage the money to achieve that stated outcome: the investment manager invests in various instruments such as cash, treasury bills, bonds, equity, real estate, etc to generate returns for mutual fund investors.
To create and manage your own diversified portfolio, you usually need a lot of capital and market understanding.
However, when you invest in mutual fund, you group the money that you would like to invest with a number of other investors, and these funds are collectively invested by an investment manager .This way, you do not have to be a financial expert or have large sums of money to invest to maximize your returns.
Some mutual funds pay out distributions quarterly, semi-annually or annually and this distributions can be reinvested if you wish to do so.
Benefits of investing in Mutual Fund
With the wide number of investment solutions available on the market, you might wonder what makes a mutual fund so special. Well, mutual funds stand out from other investment solutions because they offer:
Segregation of assets
To provide an additional level of security to investors, mutual funds are required by law to have their assets held by an independent custodian.
Mutual funds invest across a wide and diverse range of securities to assist in lowering risk. It is more difficult for individual investors to gain the same level of diversification that mutual funds offer their clients.
Mutual fund units are priced daily and so, you will always know the value of your investment.
Mutual funds are affordable because money is pooled and larger transactions can be concluded so in a more cost effective manner.
Mutual fund units can be bought or sold on any business day. In other words, you have access to your money when you want it.
Mutual funds are managed by financial experts who investigate and analyse security full time.
Distributions to unit holders are not subject to Witholding Tax.
As a mutual fund subscriber or investor, you own a sophisticated and diverse portfolio of shares, bonds and securities without having to manage them.
Different mutual fund types exist to achieve different investment objectives.
Investors are able to subscribe to the fund and redeem their mutual fund units at any given time.
Get a stockbroker
To invest in mutual fund, you have to get a stockbroker or fund manager to help you through.
Managing your invstments
When an investor manages his or her own investments, the investor advises a stockbroking firm on which shares to buy or sell as well as when to buy or sell.The firm operates on investors’ instructions and the rsponsibility rests on investors to stay up-to-date with what the markets are doing.