Mutual Fund Investing

Investing in Mutual Funds

Group Buying at it's Best

Investing in Mutual Funds offer various services that make them unique in the financial investment world. These services allow you to set up more effective investment strategies for your own personal investment plans and goals.

Below are some of the main features that make them stand out in the investment world.

Automatic reinvestment of distributions

With a mutual fund you can have all of your earnings from the fund reinvested into the mutual fund.

This is important for long term goals.

Your shares will keep building and building with time and all without you having to do a thing. This is very different from traditional investing. Say you own several bonds, you will get your earnings off of them sent to you, but there is no way of buying more automatically with the earnings.

In a bond mutual fund however you can have the earnings just keep buying more and more shares of the fund. This is one of the best methods in the “hands off” strategy used by passive investors.

Automatic investment plans

With a mutual fund you can have money automatically invested into the fund on a regular schedule. This can be as little as $50 a month so is very effective for investors of any level and age.

With this plan you can keep buying more and more shares into a fund that you may not be able to invest into otherwise. Say you are buying into a bond or stock fund, $50 a month will buy you nothing.

You would not be able to buy anything. However with a mutual fund you can keep buying shares and building your wealth. This single tool is why most investors choose mutual funds over traditional financial markets.

This type of plan is also called “cost dollar averaging” and is proven to be the most effective investing strategy that exists for the passive investor.
 

Exchange privileges

With mutual funds you generally will be investing into a fund family. This is a grouping of funds that are all operated by the same company. The “fund family” will give you the ability to transfer your money between the different mutual funds with ease.

This is powerful since over the years you will need to modify your investment plan at different stages. You can easily transfer funds between different types of mutual funds that are invested into different financial markets when you need to. This is also powerful if you are a semi-active investor, meaning you try to time things.

You can determine which funds you think will be doing great over the next year and those that will not do so good, and transfer your money as you see fit.

Check writing

With mutual funds, mainly money market funds, you can write checks from them if needed. The checks can be very useful for emergency money if needed. The other main uses of the checks are for major purchases in your life such as a house, a car, college, medical bills, etc.

As far as investing advice goes, this is an incredible feature to have in a mutual fund as it keeps your money liquid. It’s basically as good as cash even though it’s in an investment fund. That is something that is very rare for investments to offer.

Liquidity of an investment is something that makes it much more valuable and appealing to an investor.