Tag Archives: Mutual funds

Mutual Funds: Advantages and Disadvantages

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Like the other existing investments, mutual funds do have their advantages and disadvantages. It is important to know these before you make your final decision and invest in mutual funds. Doing your research is a vital action on your part. In this post, both the advantages and disadvantages of mutual funds will be presented to help you decide rationally and sensibly.

Definition of Mutual Funds

Mutual funds are a type of investment vehicles comprised of a pool of funds from several investors to meet the purpose of investing in a number of securities like bonds, stocks, currency exchange and other similar assets.

These are being managed by money managers (those who are in-charge of investing the fund’s capital to generate capital gains and achieve profits for the investors). The portfolio is structured and conserved in such a way that it matches the objectives of the fund as specified in its prospectus.

Advantages of Mutual Funds

  1. Instant Diversification

Mutual funds invest in a wide array of securities. If you are aiming for a diversified portfolio, then investing in mutual funds is for you. A mutual fund can offer you with a basket of stocks.

  1. Account Size Does Not Matter

It is perfectly alright if you have a small-sized investment account or if you only have limited capital to begin with, since a mutual fund offers you a wide range of exposure to several stocks, you do not need to buy such stocks yourself. Once you, chose a mutual fund, you are given access to diverse portfolios and to participate equally in the gain or loss of the fund.

  1. Specialized Money Management

 Fund managers are considered as experts in the investing field. Hence, mutual fund companies have more capability and resources than the average individual investor.

 Disadvantages of Mutual Funds

  1. Intraday Trading Not Possible

The “NAV” price is unknown, thus, you cannot really employ intraday trading strategies. It makes intraday trading impossible on sudden price movements in the market.

  1. Loss of Connection

 In mutual funds, the investment decisions are not reliant on you. Chances are your decision would not be regarded unless you will be called for some quarterly investor calls and updates. This in turn translates to a lack of interpersonal connection both to your account and to the people in charge of the fund. It can mean difficulty for you when managing your portfolio. The decision to buy or sell an asset is dependent on your manager.

  1. Costs are an Issue

 Costs are a part of a mutual fund’s reality. As a matter of fact, such costs can decrease your overall profits.

  1. Fluctuating Earnings

 The possibility that the value of a mutual fund will decline is high. Like other investments, you might end up with no return at all. This is due to the fact that mutual funds are affected by the price fluctuations of the stocks that constitute the fund. It does not mean that it is being run by a professional manager, the performance would be impressive.

  1. No Insurance

Mutual funds are not insured against losses – therefore, there is a possibility that losses can occur or even losing your entire investment.

Conclusion

Mutual funds both have the gains and downsides, and as an investor, you should be able to evaluate such carefully. The probability of success in a mutual fund tends to increase if you know what you got yourself into and if you totally understand the basics.

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Taking Charge of Your Money in Your 60s

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Delaying retirement is not a common instance nowadays. Studies reveal that the average retirement age by Americans is age 62. A lot of people are retiring at age 65 or older since they find themselves not adequately prepared.

A number of retirees would solely depend on social security. If you are in your 50’s or 60’s and you feel that you aren’t yet ready for retirement, here’s how you can better prepare for the future. Ensure that you will have the funds you will need to enjoy a good life.

 

How do you picture yourself after retirement?

People have different concepts when it comes to retirement. There are people who wanted to spend the rest of their lives traveling, others wanted to ensure their children’s future, others would still want to work part-time to keep with the expenses, and a number would still be haunted by debts even after retirement.

Each person’s financial situation is unique. There is no one-size fits all retirement plan. If you are a firm believer of the saying, “it’s never too late,” then it is really never late for you. Especially when it is about retirement planning, do not let hopes abandon you.

 

What if you haven’t saved enough for retirement?

Most 60-year olds do not have enough money for retirement. This point in your life, you should take an honest perspective regarding money and retirement. Financially speaking, where are you compared to your peers? If you are lagging behind your peers, it is not the right time to get discouraged. Do not get stuck on that comparison – you just do what you can with the remaining time.

 

Why do you need to preserve your capital?

Individuals retiring soon should focus themselves on capital preservation. Capital preservation means putting your hard-earned money in conservative investments and keeping a practical lifestyle. Your retirement savings must last longer – such as living on less but with sufficient money to live with and not worrying about the years to come.

You must choose the best investment strategy where you can meet your needs and goals. You might want to divert your money to income-producing yet conservative type of investments.

 

Where should you start after a period of contemplation?

You might not be able to do it on your own. When talking about retirement, there are a number of factors that one needs to consider. This is where the role of a financial advisor enters the picture. A financial advisor can help you assess your risk tolerance, time horizon, investment knowledge and understanding, targets and how interest rates can affect you.

Advisors can help you increase your income-producing investments to get you ready by the time of your retirement. Aside from that, advisors can help you choose the right kind of investments depending on your goals.

You should also take into consideration that inflation, increases in property taxes, other maintenance fees, and rental fees can undermine your money. Hence, you can consider Exchange-Traded Funds (ETFs) as they are a low-cost alternative compared to mutual funds and other managed investments. In fact, they can offer higher returns as well.

 

Conclusion

You should not let it happen that you don’t have enough money to cover your after retirement expenses. Be open as early as now and reach out to those who can professionally help you.

 

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