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Mutual Funds for Dummies

Mutual Funds for Dummies
It's no easy matter to invest in mutual funds, and not everyone can do it successfully. In this WealthHow article, we try to simplify investing in mutual finds, so that everyone interested can try their hand at it.
Kundan Pandey
If you're a beginner in the field of investment, then firstly, I would like to welcome you. This is certainly an opening for you to save a significant portion of your hard-earned money. If you have money and capital to invest, then you can surely think of investing in mutual funds. This is not something very difficult and unattainable; in fact, one of the first mutual funds basics that an investor has to learn is that mutual funds are a safer option than stock and share markets. Due to the diversification of your investments, the risk factor decreases significantly, although it's not negligible.

Investing in Mutual Funds

Mutual funds (MFs) are a simple investment option in which a pool of money is created from several investors, and then based on the total money collected, various investments are diversified in securities. The profits obtained from these investments are shared among all investors depending on their contribution. For beginners it is more about understanding the basics of this investment option, as all they have to do is to invest the money, while the rest is taken care by a group of professionals who are experts in trading and investing. Unlike stock brokering, where you have to keep an eye on the market prices of your stocks, mutual funds give you the flexibility to invest your capital, and then leave rest in hands of the firm where you've invested the money to attain profits.
  • Through various media, you'll be able to know about advertisements of mutual fund investments in several firms. Contact any of them after doing some research about their schemes and plans. Take advice from your friends and acquaintances who are already into mutual fund investment.
  • Buy the shares of the chosen company. Assign a budget to purchase shares.
  • The money from several contributors/shareholders is pooled in and a capital for investment is created.
  • The money that has been collected is invested into diverse fields, like stock markets, future markets, forex market, automobile sector, etc. Your mutual firm's fund manager is the one who decides where all the capital collected has to be invested.
  • The managers keep you informed about all proceedings and profits; you are paid dividend from the profits that have been made on the collective investment of all shareholders.
While understanding the intricacies may not be easy for everyone in the beginning, checking the ratings is a great tool to get an idea about the firm. Moreover, checking the firm where you are investing your money, and its history and success, can help you to take a wise decision.