How to Invest in Mutual Funds

You might feel mixed emotions once you hear the word investment. You will feel some sort of excitement because you imagine yourself reaping the gains in the future if you invest and at the same time, you feel a little down or even regret because you have very limited funds or simple doesn’t have the knowledge on how and where to invest.

Investing in mutual funds is one of the best financial decisions that you can ever make. Mutual funds are fairly simple investments yet they promise great returns provided that it is done long term.

Mutual funds are pool of investors money that are being handled by professional fund managers who, in behalf of the investors, does the management and investment of the funds. Fund managers are experts in the financial industry and in investing. They have extensive knowledge in investment and have wide understanding about the different markets. Chances are, you have either no or very limited knowledge about investments hence handing your money over to fund managers immediately decreases the risk.

Throughout history, mutual funds give an average return of 10 percent to 12 percent a year. If the economy does great, mutual funds does so well and could even give a gain of 50 percent in a year. If the market turns sour, it opens great opportunities to invest more since values are cheap. It can give you more shares and increase your growth potential.

Now comes the fun part, how exactly can you invest in mutual funds?

1.) The first thing that you must do is to scout which mutual fund companies are stable and have very good track record. You don’t want to invest your money in a company that doesn’t do well or worse, in a company that might no longer be there after a year. Some of the things that you must check are the 1-year, 3-year, 5-year, and year-to-date returns. The 1-, 3-, and 5-year returns are simply the growth or performance of the mutual fund company for the last one, three, and five years. The year-to-date on the other hand indicates the growth of the mutual fund company from the start of the year. Normally, the performance of the mutual fund company is being measured by the year-to-date (YTD).

2.) Assuming that you’ve already picked a company of your choice, the next thing to do is to check what the requirements are. Normally, mutual fund companies only require a copy of an identification card (preferably government issued), forms that are filled up properly, and the minimum amount to open an account. Mutual funds are very cheap investments. You can start investing for as low as $100 and you’re not obliged to add an amount on a regular basis. However, if you wish to enjoy your mutual fund investments, then you must make it a habit to add to it every time you have some spare cash.

3.) Submit your requirements to the mutual fund company. You can either send it through mail or personally hand it over to the mutual fund company. The latter is better because should there be any concerns, you can immediately answer it and avoid delays in getting an approval. However, for practicality, especially if you live far from the mutual fund company, simply send it through mail. You must be sure that the forms are filled up correctly and you have all the requirements.

4.) Ask the officer (one handling your application) about the charges that the company is going to get. Generally, there are two kinds of charges, the entry fee and the exit fee. Only a single kind exist normally. Entry fees are charges upon investment hence the amount that you’re going to invest will be deducted upon. Exit fees on the other hand are fees that are charged upon the exit or redemption. Either entry or exit fees are being charged by mutual fund companies. No company charge both.

5.) Once your application is approved, then you’re all set. Mutual funds are very convenient investments because the fund manager does the management on your behalf hence you can leave and even forget about your investment for years. Keep in mind that you can add an additional amount any time should you have spare funds and you can redeem any time as well. You are not obliged to put an additional amount monthly or whatever time interval. It basically works like bank deposits but mutual funds provide a better potential in terms of growth.