Monday, April 27, 2009

Mutual Fund Investment - Are they wise option in Recession?

Mutual funds are basically pool of funds invested in different securities for better return on invested money through diversification. There are different types of mutual funds depending on the risk factor of investment with right mix of money market instrument, government bonds, debt funds and equity linked securities. Available as Income funds, Growth Funds and Balanced funds, the penultimate question in today’s economic recession is how safe is these investments and whether it’s a wise decision to invest your money in them.

As it is the time of recession and stock market indices all over is touching low, it’s a general advice to invest more in mutual funds. This is because the NAVs (Net Asset Value) of most stocks are low. So, it is wise to buy those Mutual Fund schemes at present NAVs that are low and to get subscription in New Offers as well. Invest wisely into different categories of funds such as Commodity sector, Mid-Cap funds or even Small-Cap categories. Since, this time the market is down put the money on bonds. Once, the market gears up for a northward turn, the option can be Growth Funds. With assessment of market situation, one can switch funds.

There are some free fund switches offered by most of the mutual fund companies, so while you exercise your option of investing into mutual funds, check into these as well besides the entry load, exit load and redemption conditions.

Another option needs to be weighed when it comes to investment at any point of time and it is the time horizon. One must know as to whether the return is expected in a short span or in long term. If you are investing in Mutual funds, it is advisable to keep your money at least for a 2-3 years span of time to gain benefits. The volatility of market gets averaged out in long time span.

Investment spread out is a key benefit of investing in mutual funds and they act as lifeboats in a ship. However, to select the right mutual funds, it is the essence of picking the right ones. That’s the job of fund managers and it is not you who is making it work to churn return, but it’s the fund managers with their skilled expertise and credentials work in tandem to make the best pick for mutual funds. Again, advice is not to invest money into mutual funds with load charges in the current economic scenario.

Select one that is consistently performing. All will get into temporary slump but that gets outperformed over a longer time horizon. So, invest in mutual funds by making an informed decision.


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