Ready to make an investment but don’t know where to start? A fund may be the right choice for you. Let’s explore the five major benefits of investment funds.
5 Reasons to invest in funds
- Diversification – An individual stock can cost $100 or more. Individual bonds start at $1,000. Unless you’re earning like a one percenter, it will be hard to diversify with monthly contributions to your retirement savings. Luckily, funds offer an alternative. Investment funds can hold hundreds or even thousands of stocks, bonds, and derivatives, giving you exposure to take advantage of a general rise in your wealth from the financial markets.
- Costs – Buying and selling individual stocks and bonds costs money…lots of money. When you buy an investment fund, however, you won’t pay a transaction fee. That means that a $2,500 contribution will actually buy you $2,500 worth of investments, making you (not your broker) wealthier.
- Knowledge – Behind every investment fund are scores of MBAs from the world’s top universities. They have decades of experience in the investment management business, and their analysts know companies inside and out. When you buy into an investment fund, you buy into the knowledge of the managers – people who spend all day, every day finding new investments. Unless you work in finance, it’s simply impossible to keep up with the changes in the markets while keeping up with your full-time job.
- Practicality – Let’s face it: personal finance isn’t as easy as making a TV dinner. Investment funds lower the barriers to entry to saving and investing your money for higher returns. You can invest with a “set it and forget it” style, adding funds automatically every payday. Each month you’ll receive an update showing your growing balance, the returns in the past month, and how much retirement income you can expect from your current investment portfolio. Investment funds make investing easier than ever.
- Low minimums – You can invest in investment funds with as little as $5,000. Some select funds go as low as $250. A low minimum investment makes it easier for you to get started on any amount of income. If you wanted to run your own cost-effective investment portfolio, you’d need as much as $100,000 to make the transaction costs worth the initial investment.
Don’t wait to invest
Investing is a topic few people want to discuss. It’s complicated, costly, and sales people can be…well, sleazy. That sends most people running for the door. For me, the idea of investing is pretty intimidating because I am certainly not a finance professional or expert.
Investing is a top worthy of investigation however. With the help of investment funds, you can get started in just one day and stake a claim of ownership on some of the largest businesses in the world. When you invest, you’ll see the world in a whole new light. Each case of Coca-Cola you take home will add a few fractions of a cent to your net worth. When you buy a home with a mortgage, the interest isn’t all lost if you own shares of the local bank.
Buying part of public businesses and loaning them money is one of the most beautiful parts of finance. Though it’s unlikely we’ll be the entrepreneur behind the next Procter & Gamble or Apple, we can own a piece of their profits by investing in the market.