The Benefits Of Periodical Mutual Fund Investing
Investing, stock speculation, mutual funds, banks, and investment consultants have been put under the spotlight since the 2008 financial crisis. As a result, many people have become afraid of investing their money, and bring it to the bank at all-time low interest rates. Nevertheless, investing can still prove to be beneficial on the long term, for future expenses, or as an additional retirement.
Mutual funds is a great way to invest in a basket of products, such as stocks, bonds, or real estate. The basket is managed by a fund manager, who will select which values should be added or removed from the basket, and when. Funds can be product oriented (e.g. stocks, real estate), it can have a strong industry focus, a regional focus, or a combination of all. Therefore, by investing in mutual funds, you are investing in particular segments, of which you believe they will perform well over time, but more importantly you are investing in the knowledge and resources of the fund manager, whose task it is to keep the fund growing and to limit its losses in bad times.
In order to invest in mutual funds, you will need an investment account at your bank or at one of the many brokers available. Mutual funds can be bought in a similar way like stocks, but in stead or buying a share in a company, you are buying share of a basket, a fund. Funds can, like stocks, pay out dividends on a periodical basis, or not.
One option to consider, is so-called periodical investing. Periodical investing basically means, that you are investing a fix amount per period, let’s say per month. One option to do this is manually, by giving an order each month to buy a few shares of a fund. But some banks and brokers offer the option to automatically invest a pre-set amount of money in a particular fund, at a particular date, and perhaps even during a certain time span.
Periodic investing is in particular beneficial for people with a long-term investment horizon. Once you have picked a mutual funds, of which you think it has the potential to grow over time, you can invest an amount each month, without being swept off your feet by short-term fluctuations. Because of the fact that you invest money in the fund each and every month, meaning you will buy at a low price during crises and at a higher price when markets are doing well, the long term development of your investment is flattened, and more stable.
Another major benefit of periodic investing is, that you do not have to do anything, but enter a one-time order. Your bank/broker will execute your order each and every month. Your only task is to re-evaluate your investment from time to time, and its overall performance. Additionally, this is a perfect way to set aside some money, which you do not depend on. When investing this money, you can also not spend it, and you are building your investments almost without realizing it.
Periodical investing in mutual funds can prove to be very beneficial, as you will automatically invest in the background, market fluctuations are flattened, and you have a mutual fund manager in the background who will do all the work of selecting which products should be added and removed from the fund. Your task, however, is to regularly evaluate the performance of the fund, and decide whether you would like to keep it, or perhaps exchange it against another fund. If you are not well familiar with familiar fund, it is recommended that you seek a specialist, who can help you in your decisions.
This article does not substitute professional advice, nor is it a recommendation to invest in (particular) mutual funds. People seeking to make investments should seek professional advice.