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Why You Should Never Buy Into a Mutual Fund

A lot of people are interested in investing their savings in lucrative ventures but they don't have enough knowledge about it. Those who are new to investing for instance will surely have heard about mutual funds without fully understanding its meaning, purpose and processes. It is important to at least know about these funds because these are the usual types of investment ventures that people will encounter.

Mutual funds are a type of collective investment wherein a number of people (investors) pool together their capital to form a single investment fund. This fund is managed by an investment manager whose main responsibility is to purchase and put out stocks for sale, and in the process outperform the stock market in the industries where it is involved.

There are a lot of advantages that can be had with mutual funds.

A Group Investment

An investor is not alone in risking his capital in the stock market. There is truth in the saying that there is power in numbers. When you join into a mutual fund, the complicated work and analysis of market trends (things that new investors are likely to be unfamiliar with) will be handled by expert finance managers. You don't have to bear the burden of monetizing your investment yourself and solely bear the brunt of losses.

The convenience of having professionals expand your money for you doesn't absolve an investor completely when disaster strikes, though. It will still be part of your responsibility to monitor the trends in the stock market and monitor the direction where your mutual fund is headed.

A Wide Range of Investments

Mutual funds are all about diversification. Although you invest in a single mutual fund, your investment will be distributed to a number of other securities and industries. Thus, you get to diversify your investment portfolio in just one investment risk. You don't have to break down your capital and look for other profitable securities; the mutual fund managers will be doing the task for you.

Another advantage here is that if ever one of the securities or ventures that the fund is channeled into turns out to be unprofitable, the rest of the more successful investments will offset the loss generated by that one losing venture. Your investment will remain safe and thriving despite of that.

Opportunities for Exclusive Investments

Investing in a mutual fund will also give you the opportunity to participate in ventures that are likewise open only to large-scale investors. The cumulative sum of a mutual fund is often big enough to be entered into these exclusive and lucrative investment ventures. Unless if you are a multi-billionaire, it is unlikely for you to have enough funds to enter into a million-dollar investment by yourself.

Liquidity

Mutual funds are sold and bought at a daily basis, following market hours. This is convenient because potential stocks buyers won't have a difficult time running after the managers of the funds.

Affordable Initial Investment Requirement

One of the best things about mutual funds is that their initial investment requirement is practical and achievable for the average-income earner. It ranges from $1,000 to $2,500, depending on the mutual fund you choose to invest in.

Sounds Great Right? Here is Why You Should Never Buy a Mutual Fund...

People create these funds to make money. How do they make their money? Mostly by charging you fees. These fees add up in a huge pile over time. Do some quick research and you will quickly learn that less than 10% of mutual funds return a greater end profit to their investors than a plain old Vanguard 500 Index Fund. Why? Fees, Fees, and again Fees! Don't buy mutual funds, their just dumb.