Mutual funds give people affordable access to a wide variety of assets to match their risk profile and financial goals. There are many benefits of investing in mutual funds, including simplicity, professional management and versatility.
Their popularity compared to just buying individual stocks also comes to down to a host of other reasons – including the automatic diversification they offer, as well as the advantages of professional management and liquidity.
Here are seven benefits of mutual funds, and why they can be smart tools for your financial objectives:
1. Professionally managed
Time is money as they say, and the truth is many investors simply do not have the bandwidth to spend hours researching and buying individual stocks. Mutual funds use professional managers to make the decisions regarding which companies' securities should be bought and sold and they decide how the pooled funds will be invested.
Although investment opportunities are abundant, they are also complex. Fund managers will know what is available, the risks and gains possible, the cost of acquiring and selling the investments, and the industry laws and regulations. Basically, mutual fund managers spend every day researching and analysing current and potential holdings for their mutual fund – meaning you do not have to.
Diversification is a strong benefit of mutual funds. When you buy a mutual fund, your money is combined with the money from other investors, which allows you to buy part of a pool of investments. So, when you invest in mutual funds, you can buy one fund and obtain instant access to hundreds of individual stocks or bonds.
Funds provide greater diversification than buying individual stocks or bonds, and reduces the overall risk and volatility of your investments. Since not all investments perform well at the same time, holding a variety of investments with mutual funds may help offset the impact of poor performers, while taking advantage of the earning potential of the rest.
3. A wide range of funds
There is a wide range of mutual funds out there, so you may feel spoilt for choice. To make life easier, we, at Standard Chartered Bank UAE has recruited an experienced team of advisors, wealth specialists and relationship managers to guide customers in making investment decisions according to specific needs.
We have numerous high-quality mutual funds from leading fund houses that can be easily viewed on Online Mutual Fund platform via SC mobile app by doing a quick search by fund name, fund house, asset class, currency, and fund category – or by simply selecting from a list of shortlisted funds that match your investment needs via Fund Select.
4. Easily accessible
Many mutual fund companies allow investors to get started in a mutual fund for a relatively small sum – indeed, Standard Chartered Bank allows customers to invest from as little as $1,000. You can invest directly in a mutual fund with a lump-sum amount or invest fixed amounts regularly starting from as low as $200 in the currency of your choice.
Since mutual funds can be easily traded, this combination of low cost and ease of use makes them easily accessible.
5. Systematic investing and withdrawals
It is very difficult to “time the market” e.g to predict the market peaks and troughs. The preferred approach is continually invest on a regular basis to ensure that you achieve the longer term investment benefits of being continually invested.
A systematic investment plan (SIP) or Smart Savings Plan from Standard Chartered is a plan where investors make regular, equal payments into a mutual fund, allowing them to save regularly with a smaller amount of money. Many mutual fund companies allow people to invest as little as $200 per month.
Money can be debited directly from a bank account and invested directly in the mutual fund – and on the flipside, funds can pay regular distributions directly deposited into a bank account. This flexibility is a major draw for both and new and long-standing investors alike.
6. Easy on liquidity
A mutual fund allows investors to request that their shares be converted into cash at any time, so if you need to withdraw money, you can get cash usually within a few days. Some mutual funds do have a ‘settlement’ period of up to two days, but this level of liquidity is much better than some major investment assets such as real estate.
If you want to sell your mutual fund, the proceeds are available as soon as a day or two after you sell the mutual fund. Standard Chartered UAE is strong in these areas too with most of its mutual funds offering daily subscriptions and redemptions.
7. Do everything on the go in just a few clicks
Investing – and banking in general – has come a long way in recent years. Now you can review your portfolio and access detailed mutual fund information and performance data with factsheets, historical prices, trend charts and other indicators – all on the go online. Download the Standard Chartered mobile app to invest directly through Online Mutual Funds.
There are also new and seamless ways to transfer money instantly to bank accounts, Visa credit/debit cards and mobile wallets across the globe in just a few clicks, saving days of precious time.
- The writer is the Regional Head, Wealth Management Standard Chartered Bank Africa, Middle East and Europe