July 23, 2011

Top 5 Advantages of investing in Mutual Funds

Mutual funds, far from the awareness of most people, are a good investment option especially for starter investors.  It gives you the leverage you need and precludes you from setting your foot in a risk you still might not fully understand.  Listed below are the top 5 advantages of investing in Mutual Funds.

1.) Professional Management

Investors avail of the active professional fund management from full time investment experts.  They are backed up by research teams focusing on seizing market opportunities.

2.) Liquidity

Mutual funds shares are redeemable shares.  The fund readily buys back shares to be redeemed based on the current NAVPS. Moreover, fund's portfolio consists of liquid assets mostly marketable securities.

3.) Tax free

Earnings from mutual funds are excluded from items classified as taxable income.  This is a provision of the Comprehensive Tax Reform Package (CTRP) of 1998.

4.) Diversification

The pooled fund enables it to spread it in various securities resulting to greater propensity to earn more and spreads the risks across the different securities.

5.) Safety

The industry is highly regulated by the Securities and Exchange Commission(SEC).  Moreover, securities are kept with a custodian bank separate from the management company.  The shareholder records are with the transfer agent.  An external auditor oversees financial issues.


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