Investing in mutual funds is a very good investment, especially for a long term investment. And also for those who don’t have enough budget for trading directly in stocks market. Thus, before deciding to buy a mutual fund, there are things you should know first.
Following are 6 Basic Guide of Mutual Funds Investment:
1. Choosing the best fund.
To make a good decision when investing your money, you should analyze the following variables:
- Objective: I want to buy or spend the resources to be obtained from this investment.
- U-term horizon: as a client you have to identify whether an investment is short, medium or long term. In this way, you can select the type of substance in terms of time that can adjust to your needs.
2. Check out the types of funds.
- Equity Funds: If you want a long term investment with high returns over time, and not afraid to risk, consider a this type of fund.
- Fixed income: It is designed to obtain returns, but generally lower than those that equity funds could deliver. It is also recommended for people who want a stable gain over time, although this is not assured.
- The short-term mutual funds: Generally compete with the classic deposits. The decision to choose one or the other depends on whether you want absolute safety, but tied to a fixed term (in which case you should deposit), or a gain would rather not completely assured, but without being tied to a fixed term.
3. Do not invest in a fund based on its historical performance.
The good performance of a fund may be the temporary result of specific circumstances that are not necessarily repeated in the future. Past performance provides important information in regard to how risky a fund is and whether it has behaved in a similar way to the market and no comparable funding for future performance. Therefore, it is not advisable to invest in the fund's most profitable year, guided only by this factor.
4. Check your subscriber agreement
When investing, you have to sign a subscription contract fees and the management company must report the fund's rules. Rules may contain at least the following information:
- Compensation charged by the society for the administration of the fund.
- Fees charged on investment.
- Deadline for payment of ransom (how long it returns the money has been invested in the background.)
- Investment Policy of resources.
- Investment plans.
5. How are your mutual funds managed?
Fund managers, portfolio managers, are based on many economic studies of sectors and companies and their experience in the market. They also analyze trends in prices, interest rates, the exchange rate (dollar). They are advised by research teams comprised of analysts specializing in different asset classes and sectors.
6. Calculates the moment of rescue
At this point, you know whether you won or you lost your investment. For this, compare the value share of the day you started your investment to the value at the date of redemption. If the difference at the day of the rescue is positive, you have won, if negative, you lose. It's that simple.
It is a fact that there are many advantages and disadvantages of mutual funds. Hopefully the above basic guide of mutual funds investment will help you minimize your losses and maximize profits in mutual funds. For your best personal financial planning, it is good to have the advice of experts in this field and do research on your own about the laws, rules, obligations and business conditions. This will help you identify the best decision, which you can invest your hard earned money, while acquiring practical knowledge about how to invest in mutual funds.
Happy investing :)
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