 Hello everyone, this is financial author Amit down of Edan journal today. I'll talk about mutual funds basics After listening this video You should have a good idea of what are mutual funds and whether this is the right product for you Let's begin with what are mutual funds? Mutual fund is a collection of investment products such as stocks bonds T-Bills and can be other products Mutual fund companies collect money from investors and hire professionals to manage Your money these professionals are called fund managers when you buy a mutual fund or funds you're Buying a portion of the fund or funds altogether now why mutual funds are Suitable for first-time investors you need years of experience lots of money investment knowledge and Need to know various tools to pick individual stocks However a mutual fund does all that for you While keeping risks at minimum It's no wonder mutual funds assets have been skyrocketing in the decades I'll talk about both advantages and disadvantages of mutual funds Let's begin with advantages of mutual funds The most important advantage of mutual fund is low minimums If you'd like to start investing in other products such as stocks bonds or anything else you'd require a Hefty minimum amount, but with mutual funds you can start investing with as low as $1,000 or $500 or even low and There's another option or feature available for mutual funds that let's you allow Start to start investing and keep investing every month for as low as $25 per month or $50 per month This feature is called pack pre-authorized payment or SIP systematic investment plan or AIP Automatic investment plan different financial institutions have different name for this But this is just a small amount of money. You're putting in Every month which comes account comes out of your bank account directly The next thing our next advantage mutual fund offers is professional management Choosing an individual stock or bond can be an enormous task for new investors all the research and decision-making can be daunting and Every investors do not have the tools and resources to make a prudent decision When you buy mutual funds You are also buying the expertise and service of a group of professionals who manage those funds Each group consists of a fund manager and a few analysts This group is responsible for doing All the research for deciding when to buy what to buy what not to buy and when to sell Basically, everything is done by the fund manager and his team. You don't have to spend days Months and nights analyzing stocks and monitoring them remember this professionals cost you money and The money you're paying for mutual fund actually cover the cost of these professionals The old saying do not put all your eggs in one basket still applies Whether you're holding stocks bonds diversification is very important for investors a Mutual fund is a lot more diversified than a stock or a bond because a typical fund holds 20 or 50 or even hundreds of stocks and Sometimes they can even hold Assets throughout different classes not just one class such as stock or bonds a mutual funds can hold Some stocks some bonds some fixed-term securities and other products for an average investor Diversification can be a headache if you want to pick your own stocks bonds or other Investment products and diversify by yourself however When you're buying mutual funds, you don't have to worry about all the work and all the management Because a mutual fund is diversified by the team of professionals who are managing the mutual fund regulation Mutual funds are regulated by federal or provincial authorities or In the country where you reside there a central authority which regulates the funds So in that term mutual funds offer better protection than stocks or bonds because if you buy individual stocks or bonds on your own They can vanish overnight or a company go bankrupt overnight and you lose all your money However with the mutual funds you have some degree of protection because these funds are highly regulated Ensuring how funds are managed and how investors are informed I'll just mention a few here For example fund companies need approval from unit holders to make any significant change Also any change in the funds investment objectives has to be approved by unit holders Fund companies have to disclose the funds holdings on a regular basis fund companies need to publish procedures for the purchase and sell off funds a Mutual fund company does not physically hold its assets a third party called the custodian Holds securities on behalf of the fund company If the fund company is in trouble your money is protected Fund managers cannot just walk away or walk out with your money The custodian can be either a bank or a trust company Liquidity another feature our advantage mutual fund offers is liquidity What it means that mutual funds are are very easy to sell and buy Your money is not tied up for any specific terms or years Keep in mind that except for money market funds you will incur an early redemption fee if you redeem your fund within the first 60 days or There can be even early Redemption charges or DSC or deferred sales charges based on the country you reside and how mutual fund funds work in that country However, unlike some stocks or bonds that once you buy There's no more market available to sell or buy or transact Mutual funds are highly liquid It lets you allow to buy and sell anytime you want There might be some penalty sometimes and some other times there may not be any penalty transaction transaction cost When you're buying individual stocks or bonds each time you're buying or selling you have to pay transaction cost or trading fees to discount brokerage or your investment firm When you buy a mutual fund or you sell a mutual fund, there's no additional transaction cost and That makes it easier for average investors to buy and sell mutual funds without incurring any additional charges Now let's talk about disadvantages of mutual funds fees and expenses When you buy mutual funds you pay fees to compensate companies for doing all the work These fees are called management expense ratios or MER Depending on what you buy or what type of load you buy front-end back-end low load You might pay commission and redemption fees. I have discussed more on this on my site Adon journal and my book invest now So if you'd like to know more on this just follow it on www.adonjournal.com The next disadvantage no insurance When you put money in your bank account usually to a certain amount is protected by the The national insurance corporation are protected by the government in your country depending on where you live The amount in Canada is hundred thousand dollars. However When you buy mutual funds, there's no insurance protecting your investments. Your investments can go up or down Just like regular stocks or bonds So that's a disadvantage In terms of keeping money in the bank account which are protected you can increase the banks go bankrupt Lose of control another disadvantage fund managers Not mutual fund holders make the decisions on a funds portfolio Only by mutual funds you give your authority and You abide by the fund company's decisions So you have no saying in what to buy when to buy what to trade it all depends Or all these decisions are made by the fund managers trading limitations Stocks can be traded as many times as you want throughout the throughout the day in North America the markets are open From 9 30 to 4 o'clock Monday through Friday Because mutual funds are priced only once or once a day Which is after the market closes Regardless of how many times you buy or sell in a day You'll get only one price for the day. So basically You can purchase with the same unit value or same price for mutual funds once a day Another disadvantage is cash holdings Mutual funds need to hold a large amounts of cash to pay for redemptions meaning when Someone wants to take out sell them funds and take out the money Had this cash been invested It would have made money on this cash in other words investors lose growth potential on the cash portion There are other advantages and disadvantages of mutual funds After doing your research and going through all the advantages and disadvantages Decide if mutual funds are for you Everything comes with its positives or negatives So you have to decide that you know whether you'd like to go to mutual funds or you'd like to go with other Investment options www.edanjournal.com has a lot of information for free on various different products and services and You can read and there are other Educated Educational programs and websites you can go through before making any decisions and always you can talk to a qualified and professional Free based financial advisor to guide you through for investing and For a better future That's all for today. Thank you