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What is a mutual fund?
A mutual fund is simply a type of investment tool for allowing your money to grow in what many call passive income; that is, letting your hard-earned money work for you.
A mutual fund is a type of professionally-managed collective investment vehicle that pools money from many investors to purchase securities. ~Wikipedia
1. Passive Income
We all have to work to make a living, but mutual funds are a way to let your hard-earned money work for you. This is called passive income. By letting your money work for you, you’ve essentially created another income stream to make money while you are doing something else. Of course, the more passive income streams you have, the more… well, you get the picture.
2. Let Someone Else Manage Your Money
Many times it’s best to let a professional do the job, instead of you doing all the hard work in researching investments, stocks, etc., which of course translates to work, and precious time. In a sense, the professional mutual fund manager has done all the hard work for you. So, all you have to do is invest.
Mutual fund professionals who manage the pool of money will invest in a wide variety of investments, and by doing so will reduce the financial risks. Of course, it’s not a sure thing, as any investment involves a certain amount of risk. But ideally, a professional mutual fund manager knows what he or she is doing and has sought out those investments that will do better than average and outperform the overall markets.
4. Mass Quantities of Investments
By investing with a multitude of other investors in a large pool, or collective, your actual buying power multiplies tenfold. By investing in large sums of investment vehicles as a collective, these investments are discounted and the commission fees are greatly reduced. As opposed to doing it all yourself with a stock broker and paying commissions and fees yourself per investment transaction.
Mutual funds are considered a liquid investment. You can cash out at any time and it usually takes the following day for your cash amount to be processed. This is very helpful in times when you need cash for emergencies. Just remember, that mutual funds compound so that the longer you stay invested, your investment will continue to grow.
Be sure to check out other compelling articles on mutual funds.