Building a proper investment portfolio is not an easy task.
Not only does it require time in terms of building a proper asset allocation model, but it involves a level of expertise in terms of analyzing prospective investments for inclusion within your investment portfolio.
These two reasons alone (time and expertise) make a strong case for mutual funds (also referred to simply as "funds" in this article due to keyword restrictions) as a preferred investment vehicle for most investors.
Here are three more reasons why almost every investor should choose funds when building a properly diversified investment model.
1.
Funds offer expert investment management for an extremely affordable fee.
Even the most actively managed mutual funds charge fees that can be found under 1% (often much less).
While the fee is certainly one important aspect to consider, the primary benefit is the expert investment management that investors enjoy through mutual funds.
Where else can investors with less than eight figures employ an investment manager for very little? 2.
Funds can fill a large or small gap in nearly every portfolio.
Whether investors are looking to invest 100% of their funds in mutual funds or they simply need to rely on the expert management for an area that the investor is not as well-acquainted, funds offer the right solution.
With the number of funds available on the market today, mutual funds can be a one-stop-shop for many investors.
However, some investors prefer to pick their own domestic stock, leaving a gap in the income asset class portion of their portfolio.
Rather than become well-versed in how bonds and other income-class investments operate, a wise investor will simply find the proper mutual fund that can fill this gap.
3.
Funds are typically extremely liquid.
Unlike some smaller stocks that trade over-the-counter or through pink sheets, mutual funds are traded with the fund company.
The fund company must meet orders in nearly every situation, making mutual funds extremely liquid for the everyday investor.
In fact, funds are often more liquid than some fixed-income assets like term deposits.
With liquidity on the investor's side, a mutual fund can fill a long-term or short-term need, depending on the investor's time horizon and investment objective.
However, it should be noted that some funds will come with a back-end (or deferred) sales charge - if liquidity is a concern, make sure to purchase a no-fee series of the fund you are considering.
As well, some funds can cease redemptions, but most funds with large assets under management will accommodate investor's redemption requests.
While these additional tips certainly provide great opportunities for most investors, there are some drawbacks to funds as well.
It is always wise to speak with your financial adviser before investing in any asset.
If you do not work with a financial adviser, you can obtain all of the information you need in the fund's prospectus, which is updated regularly.
Not only does it require time in terms of building a proper asset allocation model, but it involves a level of expertise in terms of analyzing prospective investments for inclusion within your investment portfolio.
These two reasons alone (time and expertise) make a strong case for mutual funds (also referred to simply as "funds" in this article due to keyword restrictions) as a preferred investment vehicle for most investors.
Here are three more reasons why almost every investor should choose funds when building a properly diversified investment model.
1.
Funds offer expert investment management for an extremely affordable fee.
Even the most actively managed mutual funds charge fees that can be found under 1% (often much less).
While the fee is certainly one important aspect to consider, the primary benefit is the expert investment management that investors enjoy through mutual funds.
Where else can investors with less than eight figures employ an investment manager for very little? 2.
Funds can fill a large or small gap in nearly every portfolio.
Whether investors are looking to invest 100% of their funds in mutual funds or they simply need to rely on the expert management for an area that the investor is not as well-acquainted, funds offer the right solution.
With the number of funds available on the market today, mutual funds can be a one-stop-shop for many investors.
However, some investors prefer to pick their own domestic stock, leaving a gap in the income asset class portion of their portfolio.
Rather than become well-versed in how bonds and other income-class investments operate, a wise investor will simply find the proper mutual fund that can fill this gap.
3.
Funds are typically extremely liquid.
Unlike some smaller stocks that trade over-the-counter or through pink sheets, mutual funds are traded with the fund company.
The fund company must meet orders in nearly every situation, making mutual funds extremely liquid for the everyday investor.
In fact, funds are often more liquid than some fixed-income assets like term deposits.
With liquidity on the investor's side, a mutual fund can fill a long-term or short-term need, depending on the investor's time horizon and investment objective.
However, it should be noted that some funds will come with a back-end (or deferred) sales charge - if liquidity is a concern, make sure to purchase a no-fee series of the fund you are considering.
As well, some funds can cease redemptions, but most funds with large assets under management will accommodate investor's redemption requests.
While these additional tips certainly provide great opportunities for most investors, there are some drawbacks to funds as well.
It is always wise to speak with your financial adviser before investing in any asset.
If you do not work with a financial adviser, you can obtain all of the information you need in the fund's prospectus, which is updated regularly.
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