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You’ve probably heard that Mutual Funds are a smart investment avenue, but what exactly is a Mutual Fund and how does it work?
Mutual Funds are one of the most common and popular investment types for every day investors. Why? Because they’re easy to invest in and simple to understand! The accessibility, liquidity and easy-to-understand features of Mutual Funds make it a powerful investment vehicle for not only the investment pros but also investors who are just starting off.
So here’s what you need to know about Mutual Funds:
What is a Mutual Fund?
A Mutual Fund is basically an investment security that allows various investors to pool their money together into one professionally managed investment. These mutual funds can invest in a number of securities like bonds, stocks, instruments of money market, etc.
Investing in a Mutual fund is like buying a slice of a large pizza. Each investor who owns a unit of the mutual fund gets a proportional share of the fund’s profit and losses.
So technically, the investor doesn’t own shares of the holding, but rather shares of the mutual funds. For example, if a particular mutual fund includes shares in Pakistan Petroleum Ltd. among other portfolio holdings, the investor doesn’t directly own Pakistan Petroleum Ltd stock. Instead he owns shares of the Mutual fund and can still benefit from profits by Pakistan Petroleum Ltd.
What are the Main Benefits of Mutual Funds?
The best part of investing in Mutual Funds is that you don’t have to spend all day stressing about market ups and downs, as your portfolio is managed by a Team of Experts known as Fund Managers. These Fund Managers spend a lot of time analyzing the financial market performance so they can invest the money gathered from the investors in an attempt to yield maximum profit and capital gains.
Another reason why Mutual Funds are advantageous for small investors is because of diversification. All investors, whether new or pro, know that it’s never wise to put all your eggs in one basket. Mutual Funds offer diversification since each fund holds multiple stocks, bonds, etc. When you invest in a fund, you invest in various portfolios of bonds, equities and other securities. This helps reduce market risk compared to buying individual securities.
How do I Get Started with Mutual Funds?
Identify your saving goal and risk appetite before you get started. You can do this by using a saving calculator or simply getting in touch with a Fund Manager who can guide you regarding your investment journey. Then, you can sign up on iSave for a hassle-free seamless saving experience within just a few clicks. You can easily invest, convert and withdraw your investment amount online, making your investment journey even easier. [/responsivevoice]
Now you’re ready to start investing!