Investing In Investment Funds (Advantages And Disadvantages)

Advantages:

  • You can invest small amounts of money.
  • Ease of investment.
  • Liquidity, you can always sell your shares.
  • Your money is invested in several different securities.
  • Professional management that manages money.

You can start investing in funds with only 100.00 USD which is great and which is a great advantage over self-investment in stocks.

Also, buying and selling itself is done very simply. Fill in the request for the purchase of a unit in which you enter how much money you want to invest and your personal data, and fax or send the request to the company that manages the fund. Then use internet banking to deposit the same amount into the fund account.

Information about each individual fund, purchase request, and payment accounts can be easily found.

You cannot invest a small amount of money in ten different shares, but by investing in an investment fund, you are in fact investing in all the shares and securities in which the fund invests.

By investing in several different securities, the risk is reduced because if an individual company performs poorly and its share price falls, there should still be enough other shares that have achieved growth. That is why it is very important to read the fund’s statute and actively monitor what the fund invests in.

Of course, the most important reason why you invested in an investment fund is the latter: professional management.

It does not occur to you to follow what is happening in the market and where your fund invests, you are only interested in earnings. That’s why you “hire” them and pay a management fee.

Disadvantages

  • The value of the fund may fall and you may lose money.
  • The money is not insured by the State.
  • You have no control over the fund’s investments.
  • The cost of entry-exit fees and management fees.

Nothing in life is 100% safe, and as time goes on it will be less and less secure in our lives. The sooner we get rid of the fear of losing the better for us and our financial situation. I’m not saying you need to risk money unnecessarily, but mutual funds are definitely something you should consider when you want to invest your money.

Maybe after a while, you will become interested in what your fund is investing in and start more actively monitoring the capital market and stocks. If you notice a stock that you think should be invested and is not on the list of those in which your fund invests, there is nothing you can do.

Also, if you feel that some stocks are not good you cannot throw them out of your fund. Your money shares the fate of the entire fund. What you can always do is sell units and invest in another fund or start investing on your own.

The costs of entry and exit fees for individual funds can be significant and are deducted at the time of purchase or sale from the amount we buy or sell.

Always check what the costs are before you start investing in a particular fund.

In addition to these costs, each fund has a management fee. The fund lives on this fee and therefore it is in the interest of each fund to achieve the highest possible return.

The management fee is charged from the fund’s earnings. If the fund earned 15% per year and the management fee is 2% you get 13%. The fund’s returns, which are published daily, have already been reduced by this fee.

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