Risk and Benefits of Fund Management

 

Planning the financial budget is extremely important as the markets are very active and investing when the markets are low and holding it or selling when markets are high gives the investors the maximum benefit, however if one is having keen interest in monitoring the markets closely can prudently invest, however most of us have the habit of just piling in few funds or in the banks without knowing the fact that it could have given a higher ROI. This is where the fund managers come to advice on how the portfolio of steady and active funds should be built to maximize when the earnings are required most.

Benefits

Owning a portion of a huge total fund is where the investor’s money is pooled in to get a benefit in a very short period of time, is the best way for beginners to see through the managed fund markets:

  • Managed funds also make it easier to manage risk by spreading them in a variety of funds where the risk exposure is less, and so is the returns
  • capital gains are benefitted when the value of the NAV rise and the additional units are added up in the total, to get a good return typically in a mutual fund type of investment
  • since the investors may not have in-depth knowledge of how the markets work, the fund manager comes into the picture is an ideal professional to administer, advice and manage the funds in the most efficient manner, for the investors for a small number of fees
  • Fund managers have expertise in dealing with an array of investments both long term and short term hence their expertise can be used to the optimum to have a portfolio with a good mix of funds allocated properly.

Risk

As the markets in which the funds are invested are subject to market conditions which are influenced by internal and external factors, there exists a risk factor which investors have to keep in mind when the market hits a low bend

  • Similar to the stock markets, fund performances could be low and the value could drop lower than what the initial pricing was, however, the time would be ripe to inject more funds to get more number of units in a mutual fund investment
  • since the risk is spread among various investments in the portfolio one can be lucky if they had a bad fund performance against a good NAV on the other fund
  • Hidden charges, administration fees all are inclusive of the fund invested could reduce the net return for the investor.