Top Benefits of Mutual Funds for New Investors

April 18, 2018
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Smart investments help you to grow your wealth and achieve your financial goals. Whether you are saving for a rainy day fund, for a home, or even retirement, investments can get you there faster than standard savings accounts by putting your hard earned money to work in mutual funds, stocks or bonds.

One problem for new investors is that the market can be complicated and difficult to understand. Should you put your money into high-interest savings, buy bonds, or maybe even trade stocks through a Wall Street exchange? While these are all options, it makes more sense to join a mutual fund if it is your first time investing.

You can make the right first investment choice when you understand what mutual funds are, and the benefits that are offered.

Mutual Funds Explained

A mutual fund is a professionally managed form of diversified investment. When you buy into a mutual fund through a brokerage, you are essentially putting your money into a pool that is spread across a portfolio of stocks, bonds, precious metals, and other assets.

You deal only with the brokerage firm that you sign up with, and the investment managers will work to maximize returns for every member of the fund.

Top Benefits

Simplicity is a key benefit, but it’s not the only one that you can gain from investing in a mutual fund. Consider the other benefits, which include:

  • No need to spend time researching investment options, the stock market, bonds etc.
  • A mutual fund eliminates the need to spend on expensive investment tools like specialized software.
  • A professionally managed fund allows you to leverage off of the experience and expertise of professional bankers and analysts.
  • This type of investment is accessible and easy to buy into, with a number of online brokers, banks, and private institutions offering mutual funds.
  • An investment fund has wide market exposure through different investments. This diversification helps to minimize risk.
  • Mutual funds come with simple fee structures. You don’t need to pay regular transaction fees and brokerage fees like you would with individual bonds or stock trading.
  • Mutual funds are associated with a low minimum investment, often ranging between $1000 and $3000 for an initial investment. Returns can be reinvested back into the fund or paid out.

Examples of Mutual Fund Investment Brokers

If you have a moderate amount of cash that you want to invest, you can consider a mutual fund over stock trading or a standard savings account.

Two popular options include Vanguard Group Inc., a leading North American investment firm, and Merrill Edge, the online discount brokerage arm of Bank of America Merrill Lynch.

Your own bank will likely offer mutual fund accounts, so it pays to shop around to find an affordable fund that meets your savings goals. Always compare the options that are available to you, and keep in mind that while mutual funds are low risk when compared to one-off investments, there is no investment strategy in existence that is completely risk-free.

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