Mutual Funds

What are Mutual Funds

Mutual funds are the perfect investment vehicles for those who want to park their money in the right places but lack the skills to do so themselves. Investing is not child’s play, especially in times such as now, when the markets are undergoing immense upheaval. An incorrect decision, prompted by incomplete or faulty market knowledge, can wipe out your entire investment in the blink of an eye.

Most investors, even several of the bigger ones, lack the time and resources to keep track of the markets and the innumerable factors that affect them. Given this, investing successfully to show good yields is a challenge indeed. Small investors who lack the necessary background to understand the ways of the economy and finance are those who face the biggest trouble. A mutual fund which is managed by a knowledgeable, experienced and qualified expert fund manager is their best investment recourse.

Current Investment Trends with Mutual Funds

There are a number of different kinds of mutual funds but it is not correct to say that they all enjoy the same degree of success at all times. For example, a recent WSJ report highlighted how bond funds and hybrid funds are looking to be the most successful mutual funds this year, given the statistics so far. Investors have actually pulled out of mutual funds that have heavy exposure to equities and similar products.

The indications are quite clear- investors are not in the mood for taking any risks with their money. Funds investing in guaranteed returns financial products are becoming popular while those with exposure to the volatile equities market are losing their sheen. An interesting fact that reveals itself from this phenomenon is that while investors may be content to leave their day to day investment decision to fund managers, they are not completely handing over the reins of their portfolio management to them.

Another fact that becomes clear is that market movements do have significant impact on the mutual funds too. However, this impact is likely to be softened owing to the unique nature of these collective pools. For the investor this is good news at present because it is virtually impossible for a novice investor to predict which stocks will zoom in price and which other assets (such as gold, real estate etc) will perform well enough to bring him reasonable profits.

Leaving his money in the capable hands of a mutual fund manager allows him to leverage the manager’s extensive knowledge of the markets to invest safely and successfully. A novice investor may miss the first signs of impending decline in a specific asset in which he is invested. But, an experienced fund manager will not only read the signs correctly but also act quickly to mitigate adverse impact on the funds under his management.

While there are investors who continue to make their own investment decisions solely on their own, mutual funds are slowly but surely marking their very own niche in the investment world. As long as there are investors who will benefit from the expertise of fund managers, mutual funds will have their very own regular ‘clientele’.