M utual or Equity Funds have been a foundation of personal investment for many years and offer you a wide range of investment options. Trinity Holdings can help you access a very wide range of funds from the largest and most reputable fund providers.
Please consider the information below and contact us for more advice on whether mutual funds are the best option for you and which funds suit your circumstance best.
A mutual or equity fund or scheme is a type of professionally managed collective investment vehicle that pools money from many investors to purchase securities.While there is no legal definition of the term "mutual fund", it is most commonly applied only to those collective investment vehicles that are regulated and sold to the general public.
Depending on the product, you can make money from a mutual fund in three ways:
- Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all of the income it receives over the year to fund owners in the form of a distribution.
- If the fund sells securities that have increased in price, the fund has a capital gain. Most funds also pass on these gains to investors in a distribution.
- If fund holdings increase in price but are not sold by the fund manager, the fund's shares increase in price. You can then sell your mutual fund shares for a profit.
Funds will also usually give you a choice either to receive income distributions or to reinvest the earnings and get more shares.
Mutual funds have both advantages and disadvantages compared to direct investing in individual securities.
Advantages of Mutual Funds
Professional Management - The primary advantage of funds is the professional management of your money. Investors purchase funds because they do not have the time or the expertise to manage their own portfolios. A mutual fund is a relatively inexpensive way for a small investor to get a full-time manager to make and monitor investments.
Diversification - By owning shares in a mutual fund instead of owning individual stocks or bonds, your risk is spread out. The idea behind diversification is to invest in a large number of assets so that a loss in any particular investment is minimized by gains in others.
Economies of Scale - Because a mutual fund buys and sells large amounts of securities at a time, its transaction costs are lower than what an individual would pay for securities transactions.
Liquidity - Just like an individual stock, a mutual fund allows you to request that your shares be converted into cash at any time.
Simplicity - Buying into a mutual fund setting up a portfolio is relatively simple – Trinity Holdings can advise on your choices and the process
Regular Investment - Most mutual schemes permit you to set up a regular investment and to take advantage of the benefits of Dollar Cost Averaging
Disadvantages of Mutual Funds
Performance – The downturn in the world financial system since 2008 (also known as the GFC: the Global Financial Crisis) has had a serious impact on the value and performance of many mutual funds. Trinity Holdings offer a range of attractive and well performing Alternative Investments that many clients have chosen to maintain their wealth in these difficult times.
Professional Management - Many investors debate whether or not the professionals are any better at picking stocks than an untrained investor. Management is by no means infallible, and, even if the fund loses money, the manager still gets paid.
Costs - Creating, distributing, and running a mutual fund is an expensive proposition. Everything from the manager’s salary to the investors’ statements cost you money. Those expenses are passed on to the investors. Since fees vary widely from fund to fund, failing to pay attention to the fees can have negative long-term consequences. Remember, every dollar spend on fees is a dollar that has no opportunity to grow over time
Dilution - It's possible to have too much diversification. Because funds have small holdings in so many different companies, high returns from a few investments often don't make much difference on the overall return. Dilution is also the result of a successful fund getting too big. When money pours into funds that have had strong success, the manager often has trouble finding a good investment for all the new money.
For more detailed information on Mutual Schemes, please contact us at info@trinityhi.com
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