There are a myriad of investment choices available for investors today. Finding an asset that you would like to invest in and purchasing the asset can be a daunting task. However there is an easy way to invest. Mutual funds can offer a low-cost, well diversified avenue for investing. There are three main benefits to the individual investor that utilizes funds for their investing portfolio.
One of the major benefits of utilizing mutual funds to reach your investment is the fact that they offer instant diversification. A mutual fund is a basket of individual assets. The manager of the fund may hold a small number of companies such as 50, or they may hold as many as 2000. Even if a fund holds the smaller number of assets it still equates to a great deal of diversification.
Another benefit of investing in funds is the broad investment horizon they offer. Nearly any asset class you can think of offers a mutual fund. Through the use of mutual funds an individual investor can gain access to markets they may otherwise not be able to obtain. Imagine the research necessary to find good investments in developing countries. This is not necessary with an emerging markets fund since the managers are doing all of the research for you.
Finally, mutual funds can be a great low cost way of investing. Trying to own all of the individual stocks and bonds that you would need for a well diversified portfolio could get rather expensive. There are fees to have your money invested in a mutual fund. However, annual fees have been steadily declining over the last few years as more and more companies fight for your investment dollars. Additionally, if you’d like to use index funds your fees could be even lower. Since there is much less management involved in offering these investments that track indexes, many of these companies pass the savings on to the investor in the form of smaller fees. These fees are a small price to pay for this kind of diversification. When trying to figure out the fees of a fund check the management expense ratio or MER. This will tell you what the annual charge will be to the investors of the fund. Website such as Morningstar offer ratings on all types of funds and clearly identify the management fees for you.
Many times people over complicate investing. Mutual funds can clear up that confusion and allow you to reach your goals. There are several websites that allow you to compare funds side-by-side in a given asset class.. With all this research at your fingertips it should be easy to find a mutual fund to help you reach your goals.