Mutual funds are the possibility of investing your savings for the purpose of their growth, the alternative to the usual bank deposits and cash currency. Now, mutual funds are becoming more and more popular not only among those who have long been following the stock market and are well aware of the activities of these funds but also among the rapidly growing number of private investors.
Why is the popularity of mutual funds growing?
This happens due to the changes occurring in the financial markets, such as a decrease in interest rates on deposits in banks, a fall in the dollar. Savings owners become more susceptible to information about new ways to save their money.
Due to the growth of the economy, the securities market is gradually developing — information about the growth of the stock market or the rapid development of mutual funds is becoming increasingly common in business media.
Mutual funds in simple words
In fact, such a fund is a portfolio of securities united by an investment idea. Various assets can be bought inside the fund —stocks, bonds, futures, shares of foreign funds. It is only necessary to determine the objectives of the investment, and the management company's specialists will decide when and which securities to buy and when to sell and form a widely diversified portfolio for the investor.
The profit is distributed in proportion to the number of shares. For investors, a share is registered security that certifies the right to a part of the fund's assets. As a rule, mutual funds are suitable for investors who do not have time to independently manage their money, as well as a sufficient amount of knowledge in this area.
How to choose a suitable mutual fund
Before you start searching for a fund, you need to answer three basic questions:
- What profit do you expect to get from the invested money?
- How easy can you be to watch how your investments start to decrease if the market starts declining?
- For how long are you willing to invest money?
Important things to choose the fund
When choosing the best mutual funds, consider the following factors:
- Historical profitability of the fund
It is important to understand that it makes sense to compare the returns of funds only if they invest in the same types of assets. For example, bond funds compare with bond funds, and equity funds compare with equity funds. The fund's profitability depends on the situation on the securities market, but mainly the portfolio manager is responsible for the growth in the value of the fund. Your financial result depends on his ability to maximize profits in a growing market and preserve capital in an unfavorable situation.
2. The total life of the mutual fund and its volume
For a long time of its existence, the management company can fully demonstrate the results of fund management. However, this does not mean at all that it is not necessary to invest in new funds. New funds are, as a rule, the funds that are formed under relevant investment ideas. If they seem interesting to you, you need to collect as much information as possible about the fund manager and his success in managing other mutual funds in the past.
Be sure to learn about all the possible commissions that you may have when purchasing the shares, and with the costs associated with servicing the fund, including the management fee, as they will directly affect the final financial result. All commissions must be disclosed on the website of the management company.
The best international mutual funds list
This list will help you pick the best mutual fund on the international market. Specialists of FinanceWorld recommend them.
- Axis Bluechip Fund;
- UTI Regular Savings Fund
- Franklin India Dynamic Accrual Fund;
- ICICI Prudential Bond Fund;
- Principal Hybrid Equity Fund;
- Reliance Arbitrage Fund.
Naturally, these are only examples of these funds. You can choose the best one yourself.