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Investment in Mutual Funds

Investment Funds (Collective Investment)


Investment in mutual funds is one of the most popular types of investment. A mutual fund is just a large and well diversified investment portfolio of many securities, in which can invest almost unlimited number of different investors. Each investor purchases the units of the fund to become shareholder of it. Value of each fund unit is exactly the same and is calculated according to the net assets held by mutual fund and issued number of units.

 

Usually the value of investment fund is calculated for each working day, but depending on the type of fund, value can be calculated only several times for a year. The unit value of the mutual fund varies depending on changes of fund assets value, which are usually determined by the securities prices in the exchange. If the assets are unlisted on stock exchange or illiquid, then their value can be calculated, and accurately (!not always) reflected as a market value.

Mutual funds usually invests in stocks or/and bonds. It may invest in a number of different type securities at once. The risk profile and return rate of investment fund depends on the type of assets used of a fund for investment portfolio and may vary greatly.

Of course investors can invest in the same securities directly, without any help of the funds, but the main advantage of funds is that they are suitable for investing beginners and for those investors, who doesn‘t have time for corporate securities analysis and monitoring, also funds offers wide diversification. Investment in mutual funds has one more advantage: it‘s a protection from amateur mistakes, because funds are professionally managed. On the other hand, nothing for free, and the investors are loaded with additional costs (fund fees), which reduces the overall return from investment.

Investing in mutual funds is easier than investing in shares, bonds or investing in other investments directly, and requires much less time. That's the main reason why investing in mutual funds is so popular. Many of private investors who is investing in stocks, also invests in some mutual funds or ETF’s, because those instruments can help to achieve a proper diversification without spending all time for investment.



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