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| Ten Reasons of Investing in Mutual Funds |
- Professional Management
The accumulated money is managed by top notch investment professionals who are dedicated to ensure that the funds generate the best returns over the long term. They decide on behalf of the shareholders on the strategies and investments that would match each of the fund’s objectives.
- Low Capital Requirement
Direct investments usually require investors substantial capital. For instance, minimum investment for Treasury Bills ranges P100k to P1 million depending on the bank you are transacting with. But for Mutual Funds, it requires a minimum initial investment of P5,000 and minimum additional investment of P1,000. You can jumpstart an Investment Account making your hard-earned money work hard for you.
- Diversification
The investment is instantly diversified among different securities in order to minimize risk. As a saying goes, “Do not put all your eggs in one basket.”
- Liquidity
It is the ability to readily convert investments into cash. Other investment products require you to find a buyer so that you can liquidate your investments. That is not the case with mutual fund shares because the fund itself stands ready to buy back these shares at the prevailing Net Asset Value Per Share (NAVPS). While the law provides that redemption proceeds must be given within seven (7) banking days from the date of the redemption request, most funds are able to pay the redemption proceeds within the next day. Mutual funds are, therefore, considered very liquid investments.
- Safety
Mutual funds are highly regulated by the Securities and Exchange Commission (SEC) under the Investment Company Act and its Implementing Rules and Regulations. Mutual funds are prohibited from investing in particular investment products and engaging in certain transactions. They also have to submit regular reports to the SEC as well as to their shareholders.
- Higher Potential Returns
Because a mutual fund is managed as a single portfolio, it is able to take advantage of certain economies of scale. For instance, with its millions and billions under management, it can negotiate for lower stockbrokerage fees or higher interest rates on fixed-income investments. Whether you’re a conservative or aggressive type of investor with short term or long term time horizon, at least one fund is suitable for you to achieve your goals.
- Flexibility
Investors are allowed to modify investment strategies over time by transferring/moving from one fund to another within a mutual fund family. You can do so accordingly up to four times in a year at no charge.
- Transparency
The mutual fund company provides investors with updated information pertaining to the fund. The price of mutual funds’ shares is calculated every business day. You can check it in the mutual fund company’s website and also reflected in the business section of newspaper weekly.
- Convenience
You can invest in mutual funds directly through SEC-licensed like me who normally provide personal service. Most major fund companies offer a variety of services including quarterly account statements, extensive recordkeeping services to help investors track their transactions and follow their funds’ performance via phone or through their account online.
- Becomes a Habit
Once you invest in mutual funds or other investment vehicles, it becomes a habit. It increases your desire to save every month and invest it in mutual funds. You are in control of your finances.
Start investing now.
*Some informations were taken from ICAP and SEC’s Investment Company Representative Certification Program manual.
