What is a Mutual Fund?
As the name implies, this is a type of investment that deals with something mutual or collective. Mutual funds is a great form of investment for anyone and you need not be an expert investor to start. In fact, a lot of seasoned investors will advise beginners to use this tool to start.
Basically, a mutual fund is a type of investment security where investors put a large amount of funds together and invest in high-returns engines. This is usually undertaken by a fund manager. Common mutual fund managers in Malaysia include KL Mutual Fund and the Amanah Saham Nasional, among others.
Where does your money go?
When you put your money in a fund, you will first be educated about what the investment strategy would be. The fund manager is usually made up of industry and investment experts who will have a robust (although not entirely risk-free) strategy on how to manage the fund.
Because this pools together a large sum of money, the fund manager must be able to justify to the shareholders where the funds would go. In most cases, it will be invested into blue-chip stocks, bonds or other forms of stable investments.
Investing in mutual funds
When you invest into mutual funds, what you get is an easy-to-manage and efficient tool to channel your money into. Mutual funds can be quite simple. This is where you need not have to be an expert in investments to start. In fact, unlike other types of investments, mutual funds are very straight-forward.
In the market, there are many different agents who are attached to the mutual fund companies. You will constantly be approached by these agents to invest into their funds. They will then educate you on the basics of this form of investment. From there, you will learn about where your money is going and that would be sufficient. After all, you will not have a say as to where you would like to invest in and would be better to leave it to the experts
One of the drawbacks of mutual funds is that it takes a while before you enjoy the profits. When the economy (where your funds are invested in) is good, you can be assured of high returns and it the same if the economic conditions are not very favourable. Most mutual fund investors are always advised to keep their money in the funds for as long as possible to enjoy the most out of this security.