Money Matters: Mutual Funds For Long Term Investment Could Mean A Financially Secure Future

Posted by Deb | Investments | Monday 23 September 2013 3:53 pm

Slow and steady wins the race — nowhere is this more significant than when you are considering an investment. While the lure of making a fast buck from certain opportunities in the money markets can mean a financially rewarding investment, there are risks involved when you choose to take the quick route. Making money from any sound investment may take time but the danger of losing what you have put in is greatly reduced in contrast to investments made on a whim.

Pooled Resources

Most serious investors would look into mutual funds for long-term investment for different reasons. For one, a mutual fund may free up individual investors from having to personally choose and monitor a portfolio because the asset management company makes the investments in different securities. For another, a mutual fund is a sound option for building up a long-term cash fund to use for a kid’s education, retirement, or any other particular financial objective. As such, many organizations actually consider a mutual fund as a way to grow pension and trust programs.

So what is a mutual fund? A mutual fund pools the money of individuals and/or institutional investors to create a big asset base. The assets are then managed by full time, registered professionals from an asset management company which is tasked to develop and maintain a diversified portfolio. The profits or losses are then shared by the investors and will be proportionate to the money they invested.

The Appeal of Mutual Funds

Mutual funds, for long term investors, are ideal investments because of the safety delivered in terms of limiting the risk for losses. Mutual funds are regulated by a securities and exchange commission of concerned countries; in India, the SEBI or the Securities and Exchange Board of India is tasked to protect the interest of the investors. In addition to limited risks, mutual funds could also offer good liquidity. This means that investors could convert their investments into cash, which will then be based on the current Net Asset Value (NAV) per share. NAV is basically the market value of a securities scheme.

Of course, even with the expert handling of an asset management company and such promising prospects, the retail investor should still learn as much as one can about mutual funds, including how to further become a successful investor. A potential source could be Parag Parikh’s views on behavioral finance and value investing. Parag Parikh is a fellow at the Harvard Business School and has authored two books, one of which is the bestselling “Value Investing and Behavioral Finance: Insights into Indian Stock Market Realities.” The book delves into the fallacies of the stock market and guides investors on making better informed decisions.

In conclusion, whether you intend to go with the long-term prospects of mutual funds, it pays to know what you are getting into because a market on an upward swing can quickly shift to a downward direction. Arm yourself with the proper knowledge. Read more about mutual funds (and other investment options). And gain better insight into the money markets through experts like Parag Parikh.

About the author: Sarah Miller is a business consultant and a part-time writer. She loves to travel abroad to have a good grasp on various types of businesses. She actually puts her learning through writing. She writes in behalf of http://amc.ppfas.com/.

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