When you think of investment securities that you would consider putting your money in, first consider the advantages that you will derive from them. Mutual funds, just like any other type of investment, have advantages that make them popular among investors. However, it is not all bread and butter as far as the advantages are concerned because, what may be an advantage for one investor may be a disadvantage for another. It is up to you as an investor to weigh a given advantage and see whether it works for or against your investment goals and objectives. One of the most popular reason why one should invest in mutual funds is the fact that they provide you with room for diversification.
Diversification is one aspects of investing that plays a crucial role in helping you spread the risk that is associated with any given investment. It simply implies investing in many different types of stocks, shares and bonds, such that if one carries a high risk factor, it is covered by another whose risk factor is not as high.
For example, it seems to be generally agreed that small cap companies are those that have a value between $250 million and $2.5 billion, mid cap companies fall between $2.5 billion and $10 billion and large cap falls between $10 billion to over $200 billion. However, these figures are not constant because they are dependent on the market conditions.
So what drives them to do it so hard? Yes, you guessed it right. Money. These investment linked products always provide the salespersons with enormous amount of commission. As high as 50% of your first year payment could possibly entirely goes to the pockets of the person who handed you the pen for signature. What I can say is there is nothing you can do about it in a capitalism society.
One other advantage, but which seems to be a contentious is that, mutual funds are professionally run by a manager who oversees everything on behalf of the investors. The advantage with this is that, the investor is relieved of the hard task of having to follow up on what is happening in the market, and instead, all this is handled on his behalf by the manager.
Lastly, the fund manager takes a sip of what they earned for you, of course. This is the only cost I think reasonable. After all, they are the ones who executed the buy sell commands for you. But do not be naive and think that they really work hard to earn as much for you as possible. What they really care is to stick to the policy and make sure the growth rate does not fall below a certain level so that they keep their high pay job. So now you know. You can go ahead and decide whether to answer the call from your 'personal financial planner' next time. God bless. - 31391
Diversification is one aspects of investing that plays a crucial role in helping you spread the risk that is associated with any given investment. It simply implies investing in many different types of stocks, shares and bonds, such that if one carries a high risk factor, it is covered by another whose risk factor is not as high.
For example, it seems to be generally agreed that small cap companies are those that have a value between $250 million and $2.5 billion, mid cap companies fall between $2.5 billion and $10 billion and large cap falls between $10 billion to over $200 billion. However, these figures are not constant because they are dependent on the market conditions.
So what drives them to do it so hard? Yes, you guessed it right. Money. These investment linked products always provide the salespersons with enormous amount of commission. As high as 50% of your first year payment could possibly entirely goes to the pockets of the person who handed you the pen for signature. What I can say is there is nothing you can do about it in a capitalism society.
One other advantage, but which seems to be a contentious is that, mutual funds are professionally run by a manager who oversees everything on behalf of the investors. The advantage with this is that, the investor is relieved of the hard task of having to follow up on what is happening in the market, and instead, all this is handled on his behalf by the manager.
Lastly, the fund manager takes a sip of what they earned for you, of course. This is the only cost I think reasonable. After all, they are the ones who executed the buy sell commands for you. But do not be naive and think that they really work hard to earn as much for you as possible. What they really care is to stick to the policy and make sure the growth rate does not fall below a certain level so that they keep their high pay job. So now you know. You can go ahead and decide whether to answer the call from your 'personal financial planner' next time. God bless. - 31391
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