Christopher Best is pursuing his Master of Science in Finance Degree at Florida International University.
Great investors, such as Warren Buffet, recommend very strongly investing only in the stocks and companies that you know a lot about. If you are very busy, have no time to research businesses, and are unwilling to take unnecessary risks, you may want to look at mutual funds.
Investing
in mutual funds is very easy. You can do it from your computer or from
your phone. Mutual funds pool together the money that they receive from
ordinary working people. They then invest this money in stocks, bonds,
and other securities. Because there is a pool of money, mutual funds can
hire investment professionals to manage the money. Some mutual funds
invest primarily in stocks. Others specialize in bonds. There are also
certain mutual funds that have a combination of stocks, bonds, and other
investment vehicles.
Mutual funds provide a lot of advantages to investors. They can afford to diversify the stocks that they buy. Diversification is quite expensive for individual investors because of their transaction fees. These are only worth it if you buy, on average, more than one hundred shares of a stock. In the latter transaction, size may become a problem. If an average stock price is fifty dollars and you want to invest in a dozen companies, you’ll need over sixty thousand dollars to buy one hundred stocks in each company. This is not something many individual investors can easily afford to do, yet for mutual funds, this issue is not a problem.
If you invest on your own, you have to spend your own time researching businesses and markets. Mutual funds hire professional full-time management for that. Mutual fund managers research financial statements, competitors, business strategies, and market positions before deciding on making an investment decision. The best managers have graduated from the top schools in the world, work long hours and have a lot of experience in the field. While some mutual funds do charge high maintenance fees, these funds usually have an impressive reputation and track record. There are also a lot of funds that operate using a commission-free structure and may charge somewhere between twenty and one hundred dollars to manage ten thousand dollars or even more.
As with most things in life, mutual funds come with their own drawbacks. The first drawback is the matter of funds control. When you invest in a mutual fund, it may seem like a black box to you. You will have managers investing your money and they will not ask you for your permission or opinion when choosing companies to invest. If you invest in a mutual fund outside of your retirement allocation, you may end up with a relatively high tax bill. Students of finance such as Christopher Best learn a lot about money management and tax implications during their years in school.
Great investors, such as Warren Buffet, recommend very strongly investing only in the stocks and companies that you know a lot about. If you are very busy, have no time to research businesses, and are unwilling to take unnecessary risks, you may want to look at mutual funds.
Investing
in mutual funds is very easy. You can do it from your computer or from
your phone. Mutual funds pool together the money that they receive from
ordinary working people. They then invest this money in stocks, bonds,
and other securities. Because there is a pool of money, mutual funds can
hire investment professionals to manage the money. Some mutual funds
invest primarily in stocks. Others specialize in bonds. There are also
certain mutual funds that have a combination of stocks, bonds, and other
investment vehicles.Mutual funds provide a lot of advantages to investors. They can afford to diversify the stocks that they buy. Diversification is quite expensive for individual investors because of their transaction fees. These are only worth it if you buy, on average, more than one hundred shares of a stock. In the latter transaction, size may become a problem. If an average stock price is fifty dollars and you want to invest in a dozen companies, you’ll need over sixty thousand dollars to buy one hundred stocks in each company. This is not something many individual investors can easily afford to do, yet for mutual funds, this issue is not a problem.
If you invest on your own, you have to spend your own time researching businesses and markets. Mutual funds hire professional full-time management for that. Mutual fund managers research financial statements, competitors, business strategies, and market positions before deciding on making an investment decision. The best managers have graduated from the top schools in the world, work long hours and have a lot of experience in the field. While some mutual funds do charge high maintenance fees, these funds usually have an impressive reputation and track record. There are also a lot of funds that operate using a commission-free structure and may charge somewhere between twenty and one hundred dollars to manage ten thousand dollars or even more.
As with most things in life, mutual funds come with their own drawbacks. The first drawback is the matter of funds control. When you invest in a mutual fund, it may seem like a black box to you. You will have managers investing your money and they will not ask you for your permission or opinion when choosing companies to invest. If you invest in a mutual fund outside of your retirement allocation, you may end up with a relatively high tax bill. Students of finance such as Christopher Best learn a lot about money management and tax implications during their years in school.
