A Mutual Fund is a type of investment where a group of people pool their money together to buy stocks, bonds, and other types of assets. This is done so that the risk is spread out among many different investments, which can help to possibly minimize the risk.
A Mutual fund by the way is a registered company invested in different asset classes. So when you invest in a mutual fund, you are essentially buying shares of that MF company. You also get to vote annually on certain matters involving that company.
The money you invest is used by the MF company to buy assets, and the value of your investment will go up or down based on the performance of those assets.
Seems difficult? Don’t worry - A professional manager is in charge of choosing which assets to buy and sell, and they just charge a small portion of your investments as fee for their services. So all you have to do is continue investing and revisit your investment every once in a while.
There are several potential benefits of investing in mutual funds:
- You get to diversify your hard-earned money. One of the main benefits of mutual funds is that they allow investors to diversify their portfolios by holding a wide range of assets. This helps to spread the risk by investing across many different companies and industries, which can help to reduce the impact of any single investment having losses.
- Get access to Professional Management. Mutual funds are managed by professional fund managers who have expertise in selecting investments and managing portfolios. This can help to save individual investors time and effort in managing their own investments.
- Access to variety of quality assets. Mutual funds are widely available and accessible to individual investors, allowing them to invest in a variety of asset classes and sectors, here and abroad, without needing to have a large amount of money to invest. In regular investing, you would normally have to buy huge number of shares / lots before you can invest. But with MF, these are all possible because, it’s basically a pooled fund
- Liquidity. Mutual funds can be bought and sold on a daily basis, providing investors with the ability to access their money quickly and easily, if needed. You can withdraw/redeem anytime you feel you need to profit take already.
- Affordability. Mutual funds often have low minimum investment requirements, making them accessible to a wide range of investors. For as low as 100, you can already buy shares in our Sun Life Prosperity Peso Starter Fund. Because of its affordability, it makes it easier for individual investors to achieve diversification and take advantage of professional management that may not have been possible otherwise if you are just a startup investor.
Lastly a very important note, make sure to always keep in mind that investing in mutual funds carries some risks, including the possibility of losing portion of your invested money due to market volatility. It's important to carefully consider your investment goals and risk tolerance and determine what type of investor you are before investing.
Overall, investing in a mutual fund can be a good way to diversify your investments and potentially earn a return, but it's important to understand the fees and risks involved before investing.
Are you the conservative type, or are you the aggressive one which can accept few losses for a higher return, or are you both?
If you want to know more, join our next MF101 webinar happening this month.