A mutual fund describes a company that owns investments. A portfolio manager is hired and they are paid a management fee. They are responsible for investing the money raised by the fund using the strategy documented in a mutual fund’s prospectus. Making an investment can be a challenging experience for even the most seasoned investors; if this is your first time making an investment this can be even more worrying. Here are some money saving tips for your first mutual funds investment.
The best advice for a beginner is to keep it simple and get financial advice from a professional.
Don’t invest if you don’t understand
If you don’t have a clear understanding in the fund that you are investing in, don’t part with your money. You should be able to clearly explain the strategy used for your investment and its associated risks.
Think in periods greater than 5 years
It is easier to accumulate wealth when you invest for longer periods of time. It’s best to speak to your financial advisor with regards to your risk profile, however most advisors will tell you that a long term outlook will be better when investing. So when investing, it is important to keep this in mind. If you are looking for a shorter investment period, perhaps a mutual fund is not for you. As always, speaking to an expert first is always important!
Choose the best funds
There are many mutual funds to choose from, but if you want to make money you will need to find out which funds are best for you. To determine this you should start with a risk tolerance questionnaire. This will give you an idea of how much risk you can handle without panicking and selling your shares unnecessarily. Essentially, you are going to invest in the funds where you will make the most money with minimum risk.
The best advice for a beginner is to keep it simple. It is also a good idea for first time investors to get financial advice from a professional as they can look at your situation and recommend products that suit you. Once you have decided on your long term investment goals, base the purchase of your fund on this plan and stick to it.