Why Invest in a Mutual Fund what are Advantages what are Typical Returns

As the economy continues to recede and the standard of living rise, many seek to find alternate legal ways to make money. One of the ways to do this is by investing in the stock market. Though investing in stocks may earn one a lot of money it can be risky. If the stock someone investing in does not succeed they could lose a life time worth of money. Despite the risk, people continue to participate in the stock market. To minimize the risks, some experts have found ways of investing that will higher the rate of success.

One way investors increase their risk of success in the stock market is by using mutual funds. “Mutual Fund is a financial intermediary which collects money from many investors with a common financial goal and invests it in bonds and stocks etc,” (www.altuisdirectory.com). Therefore, if one invested in a mutual fund they are not just investing in one stock but in several others as well. This increases the chance of success.

Mutual funds may sound good, but how does it work? According to Actuarial Foundation (a financial non profit organization), when an investor purchases a mutual fund he/she is part owner of the stocks it covers. When purchasing mutual funds it comes with a professional financial manager will decide where to invest the money. A huge advantage of having a financial manager decide how to invest your money is that they “have been around the industry for a long time and have the academic credentials to back it up,” says Dustin Woodard in his article Mutual Funding vs. Stock Investing. He shares, “that they will take the time to research and study the trade market on a daily basis,” whereas the common person will give up in frustration.

Another advantage of obtaining mutual funds is that when you purchase one you are likely to get back a huge amount of interest. Former mutual stock holder Anne Kelley says, “I was able to get around 15 percent interests along with my money being store in banks around the world.” This is possible because many mutual funds are held overseas.

Mutual funds like with every good deal have a dark side. One disadvantage of purchasing mutual funds is that, “investors must pay sales charges, annual fees, and other expenses (which we’ll discuss below) regardless of how the fund performs,” (www.sec.gov/investor). The reason one has to pay so many fees when purchasing mutual funds are because they cost more to operate states Jason Zwieg Money Magazine writer. Also, if the mutual fund is held in another country one may have trouble withdrawing cash from it. Former mutual fund holder Kelley explains, “a lot of mutual funds are overseas it is not regulated by our government. Many countries allow for foreigners to deposit money in their bank but not take it out.

Well, with all the advantages and risk involved in buying mutual funds many still do it. Some managed to get wealthy while others remained the same. If you are considering purchasing mutual funds you must research it thoroughly. Keep in mind the disadvantages and make sure you are able to deposit as well as withdraw money from mutual fund earnings. Above everything else, remember that the stock market is unpredictable, so invest wisely.