Today, there are tons of on-going conversations about how to start investing in mutual funds and their implications for an investor’s portfolios. But this is rather unsurprising. After all, a recent study by Nairalytics revealed that the mutual fund industry asset value was worth N1.38 trillion as of September 2021. And ever since, studies have predicted significant growth over the next couple of years.
Given its growth potentials, we also agree that there must be something in the offing. So, what are mutual funds and how do they work?
A mutual fund is a fund managed by professionals that pools money from many investors to invest it in securities—stocks, bonds, short-term money-market instruments, other assets, or some combination of these investments.
Under this arrangement, the funds pooled together are overseen by experts known as fund managers, fully accredited by the Securities and Exchange Commission, Nigeria and working together to ensure that investors earn returns/interests.
When investors purchase shares under the funds, fund managers pool the funds to make investments on their behalf. Each mutual fund share represents an investor’s proportionate ownership of the mutual fund’s portfolio and the income the portfolio generates.
There are different kinds of mutual funds you can select to invest in, top of which are:
Mutual funds allow investors to buy a share of the funds, with each share purchased representing partial ownership of the fund, together with any returns the fund managers are likely to make.
Below are some benefits of mutual funds:
Just as in other investment schemes, it is vital to research certain factors before choosing to invest in mutual funds.
Below are some of such factors:
Before investing in a mutual fund, it is vital to consider your appetite for risks, as this will guide you while selecting funds with assets and strategies that fit your profile.
Assets are classified based on their risk levels, with conservative funds having low-risk assets, while aggressive funds are high-risk assets. Balanced funds offer a bit of both high and low-risk assets.
Define the goals you wish to attain with your mutual funds’ investments. Do you intend to use it for your kids’ college education or as your retirement savings? Your answers will aid you in deciding which funds to invest in.
How long do you wish the investment to run? Most mutual funds are best suited for long-term investors. As such, if you need your money in the nearest future, then you may have to consider other investment schemes.
Investing in mutual funds is a great way to diversify your investment portfolio and earn passive income. But you get a best experience only when you invest with the best in the game.
Cordros is a leading financial services group, offering fund management services, amongst many others. We are not only accredited by the Securities & Exchange Commission (SEC), we have also been recognised as top experts in the mutual funds investment.
Start your investing journey today and give us a call on 07002673767 or email at [email protected].