A Mutual Fund is a pooled investment scheme where a manager combines the money of several people (investors) and invests it on several investment instruments. The fund manager professionally manages the funds and spreads it on stocks, money markets, bonds and real estate. Instead of investing in only one investment instrument they diversify it based on the policy of the fund manager. For example some fund might invest as follows:
|Fund Name||Stocks||Money Market||Real Estate||Bonds||Others|
They might vary their investments based on the target of the client, policy of the fund, the economy and so on. When your fund performs well you make money but when it does not you lose money, though only a fraction.
WAYS OF MAKING MONEY FROM MUTUAL FUNDS
The value of a mutual fund just like shares goes up in value from time to time. In worse case scenarios it can go down. The higher the total value of the securities owned by the fund the higher the value of the fund and vice versa.
The earnings from various investments of funds are distributed to shareholders. For example the dividends from stocks, interests from bonds, income from real estate and so on are shared to shareholders periodically based on the laid down policy.
CAPITAL GAIN DISTRIBUTIONS
When the fund manager sells securities at a profit, the fund make capital gains. Funds are required to distribute the gains to shareholders at regular intervals. During the completion of your form you can choose to reinvest such income, save it in your account or have it sent to you.
HOW TO INVEST IN MUTUAL FUNDS
You can invest in two ways, thus:
Most funds make investment easy for people by offering plans that makes it possible to invest periodically – yearly, half-yearly, quarterly or monthly. You can pay directly or via bank transfer. You can even instruct your bank to transfer the stipulated amount from your account to your mutual fund account periodically. This is how periodic investment work, if you invest in a fund that allows for N5,000 monthly investment this means you have to increase your investment monthly by N5,000. Your fund manager help you invest your monthly payment on vehicles that are worth investing on at that particular point in time. You might buy different programs based on what your target is. For example you might be saving toward some future project say a wedding or starting a business or even building a house. Your fund manager will invest either on aggressive investment vehicles or reserved ones based on your preference. If you are saving towards a wedding you might be investing in more aggressive vehicles than someone who is saving toward building a house. It is a function of your need, your age or the time you want your investment to mature.
LUMP SUM INVESTMENT
If you have the money to throw around, it is best you invest that lump sum in a mutual fund rather than embarking on some wasteful venture or allowing scammers to outsmart you. Mutual fund is a bit secured compared to other investment instruments like stocks that are possible to lose all your money in a day especially if you are not an investment guru. There is no maximum investment with many funds however some have minimum while others do not. It is up to you in respect of the amount you want to invest.
Now that you know how you can invest in mutual fund, it is important that you know the reasons why you should invest in Mutual Fund to solidify your decision.
- Mutual Fund is a very safe haven for people who want to have some form of investment but have little cash to do so.
- It allows you not to keep your eggs in one basket so that you don’t lose all your money at once.
- Since most of us are not investment gurus and don’t have the money buy so as to involve a broker, the best bet is to invest in mutual fund because professionals will manage your money for you even if it is the minimum investment.
- Mutual fund is cheap to invest in, this is because there are a lot of people in the pool.
- Mutual Funds are easy to dispose off in exchange for cash.
Have you made you decisions yet? Would not turn your money over to Mutual Funds Managers today? There are many of them in Nigeria today just check on anyone of them and fill your account form today.
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