Lorraine J. Green, Contributor 
Green
"To create lasting wealth for the future, you want to invest your money in investment tools that will successfully create wealth for the future. Good solid investments that you stick with for the long term are your best bet for creating lasting wealth."
- Anon
MANY OF us understand the benefits of and want to have an investment portfolio but have little time to manage it. We are also lured by the potential return on the stock market but are a little concerned with the amount of risk we may have to face. Nonetheless there is an investment option that can meet our need to create wealth while minimising our risk exposure (liability) and the product is mutual funds.
For clarity, a mutual fund is an investment product in which your money is pooled with the money of other investors. The fund has a professional manager who is responsible for investing the pooled monies into specific securities, which more often than not include stocks.
This is a clear advantage to the investor who can now leave it up to the professional fund manager to research potential investments, monitor the investments in the fund and plan the purchase and sale of particular assets.
THE MANY BENEFITS
1. One rule of investing for both large and small investors is diversification.
Diversification involves having a mix of investment products within a portfolio. By owning shares in a mutual fund instead of owning individual stocks, your risk is spread out. A loss in any particular investment is often minimised by gains in others.
By purchasing mutual funds you are provided with the immediate benefit of instant diversification without the large amounts needed to create individual portfolios.
2. Another benefit to investing in mutual funds is economies of scale.
Let's explain this term by using an example. In many grocery stores the more of one product that you buy, the cheaper the unit cost of the product becomes. When you buy a dozen donuts, the price per donut becomes cheaper than if you bought only one.
Because of their large buying and selling volumes, mutual funds are able to reduce the transaction costs to its investors.
3. Then there is divisibility.
As investors, many of us don't have the exact sums of money to buy a lot of securities and a thousand dollars is usually not enough to buy a rounded portfolio. However, investors can purchase mutual funds in small volumes. So instead of waiting until you have enough money for higher-cost investments, you can get in right away with mutual funds.
4. Another benefit of having mutual funds is the relative ease of getting in and getting out whenever you wish.
Mutual funds allow you to have shares converted into cash at any time without having to find a buyer which would be the case when selling as an individual investor. This ease of converting to cash or liquidity benefit comes in handy in the event of an emergency.
Since most mutual funds have an automatic purchase plan, you can invest on a monthly basis also known as taking advantage of dollar-cost-averaging. This is simply the technique of buying a fixed dollar amount of a particular investment on a regular schedule regardless of the price. It should also be mentioned that regardless of how much money you invest, each shareholder in the mutual fund will get the same percentage return on each share owned.
SIMPLE WEALTH
Mutual funds continue to be a popular investment vehicle for investors. Their simplicities along with other attributes provide great benefit to those investors with limited knowledge, time, or money. When you decide whether mutual funds are best for you and your situation, do not procrastinate, start today. Remember the time is now if you truly wish to create wealth that lasts well into your future and beyond.
Lorraine J. Green is Wealth Manager at NCB Capital Markets, contact her at
1-888-4WEALTH or info@ncbcapitalmarkets.com.
