Wednesday, 18 May 2011

Advantages of Mutual Fund and Performance

Stock traders use mutual funds to compensate their trading losses. Because mutual funds are managed by expert fund managers and the chances of getting an utter loss is very less. But equity mutual funds have the same volatility of stocks and the value may go down when the stock market index going down, Start a mutual fund is important step to reduce your loss from stock market.

Selecting a good mutual fund is not an easy task. There are so many factors affect the performance of mutual fund. It helps the investor to diversify their investments, because mutual funds invest in a selected group of shares and the investor can enjoy the diversification of investments. An individual trader cannot make that much diversification in investment and the benefit also will be less. This does not reducing the careful selection procedure of high performing mutual fund.

The main advantages of mutual funds is that you can get expert management of your invested money by experienced fund managers and the chances of getting loss is very rare. In stock trading you have to apply your own mind and your experience or lack of experience will affect the profitability and even the capital amount. In mutual fund a team of expert under an experienced fund manager will decide the future or your money and will get expert management without paying professional fee and get all the mutual fund research free of cost.

In case of mutual fund you could not take decision about the purchase and sell of your investments. You can take the only decision is that whether you purchase the mutual fund or redeem the fund? All other decisions are in the hands of fund managers. This may consider as one of the disadvantages of mutual fund but for inexperienced persons it is an advantage of mutual fund also.

Another disadvantage of mutual fund is that you cannot sell the mutual fund when you hardly need money, if the mutual fund NAV shows a downward trend, unless you should bear a loss or lesser profit. This is same in the case of stocks also.  The solution is that you should keep reserve money in your bank account or fixed deposit account for meeting such emergencies.

Mutual funds invest in abroad also and you can gain from the world market and the territorial loss may not affect in your investment in such mutual funds. If one country shows downward trend you can get the benefit of upward trend from another country.

You have to watch your mutual fund regularly to learn the trend of your investment and the growth or fall of your investment. If it shows a bad trend you can redeem at any time, only if it is an open ended mutual fund. You should not completely trust the fund managers, because it is your own hard earned money and be brave enough to discontinue an investment, if it is not providing any growth. You can update information from internet and other Financial Medias.

Mutual funds are good as hedge fund of your investment in shares, only if you handle it with care.

3 comments :

  1. i wants to know about the policy whic covere my full-family insurance and mediclaim.

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  2. [...] type of mutual funds are varies as per the investment strategy and the assets invested in. To take advantages of mutual fund the investor should plan mutual funds as per the financial [...]

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  3. [...]  is very easy now and an expert fund manager will deal with everything. We should choose mutual fund wisely and start investing. The rest of the work will be done by the mutual fund. Mutual fund [...]

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