Mutual funds -Everything You Need To Know
A lot of times you might think of investing in shares. But you hesitate because of the risk factor involved. All the more your fear is due to lack of knowledge on the share market. All those jargons like put option, futures, pull option etc. always look tough. So, stay away from investing in shares. You will be surprised to know that mutual funds are something which can help you to invest in shares without worrying about the fears. Read on to know how:
What is a mutual fund?
It is nothing, but a fund of investment created by pooling the resources of various investors like you. The investors can be individuals or institutions. These are managed by the fund manager who takes care of the investing action. They are experts and possess a professional qualification for investing in shares. Hence you need not have anything to worry about further. Once you invest the money you can wait for the required period and withdraw your funds. Mutual funds provide a good appreciation for your investment. These are equally attractive like trading in cryptos using bitcoin code.
How it originated?
In 1822, King William I launched the first mutual fund in the Netherlands. Later on, mutual funds made their way to the US in the 1890s. But the funds which work like the ones we have today came in the 1920s only. In 1929 there were economic crashes globally. This resulted in the framing of legal regulations all over the world. Presently there are thousands of mutual funds functioning all over the world.
The advantages of investing in a mutual fund are:
- The spread will be high. Your funds will not be concentrated in a specific type of investment. Instead, they are invested in various types of industries. Hence risk is low.
- These funds operate on a large scale. The resulting economies are not available when you invest personally in shares.
- They have high liquidity. You can quit and withdraw your money whenever you want.
- When you invest individually, it is not always possible to hire professional experts for investment advice. Hence mutual funds ensure the availability of these services even for the ordinary investor.
The disadvantages of investing in a mutual fund are:
- There is no control over your investment. If the fund managers are inefficient then there are chances of poor performance.
- They charge a high fee like entry/exit load, commissions, redemption fee etc.
- These are not insured against losses. So, in case of loss, you will not be compensated.