Ensuring a financially free future
Investing for your future
Working towards financial freedom
As a student, you can build your investment portfolio and grow a fortune by allowing your money to work for you. By putting aside a portion of your pocket money from time to time, you can actually invest it in a venture and watch your money grow. Now one of the ways in which your money can work for you as a student is to invest in a mutual fund.
WHAT ARE MUTUAL FUNDS?
A mutual fund is an open-ended fund operated by an investment company which raises money from shareholders and invests in a group of assets in line with their objectives. Mutual funds raise money by selling units of shares of the fund to the public. They then use the money they receive from the sale of their shares (along with any money made from previous investments) and invest in stocks, bonds and money market instruments. The Fund Manager using his expertise in investment management allocates the funds in line with the mutual fund's investment objective. Unit holders own a portion of each of the Fund's underlying securities.
Mutual funds specify their "investment objectives" in their "trust deed" (a document that captures specific information on a fund as agreed by the Fund's Trustee and Manager) and "prospectus" (a formal written offer document that contains material information on the type and structure of the fund).
BENEFITS OF MUTUAL FUNDS
Mutual Funds have become popular because they offer the following advantages:
Due to the diversified nature of mutual funds, an under performance in one stock is not likely to have a huge negative impact on the mutual fund. The asset allocation strategy as spelt out by the Fund Manager makes mutual funds more effective in managing risk compared to equities and more profitable than time deposits. Diversification sharply reduces the risk of a serious loss due to problems in a particular company or industry.
Open-ended mutual funds are highly liquid and investors can cash in their investments anytime they want. While many individual securities can also be readily bought and sold, others aren't widely traded. Mutual Funds conveniently give access to your funds when needed.
Unlike other investment instruments which require a substantial amount of capital, investing in mutual funds is not demanding. For instance, with as little as N10, 000 one can invest in a mutual fund.
Mutual Funds offer services that make investing easier when compared to investing in equities through the stock market. Direct stock investments attract major administrative issues such as signature verification, verification documentation, bankers' confirmation, etc for every individual stock an investor purchases. With a mutual fund however, you are not burdened with these administrative issues. An investor receives only one certificate for his/her initial investment made into the Fund.
Experts make investment decisions. You know that you are better off investing in a variety of shares but the question is which ones? When you invest in a mutual fund, you save time and effort by having experienced portfolio managers carefully select and monitor investments in the portfolio. These managers have sound investment experience and as such have greater success with managing investors' investments than you would have done.
TYPES OF MUTUAL FUNDS
There are many types of mutual funds, including aggressive growth fund, asset allocation fund, balanced fund, blend fund, bond fund, capital appreciation fund, fund, growth, growth and income fund, hedge fund, etc.
Mutual Funds enable investors to diversify their risk as they invest in a variety of asset classes, encourage a savings culture and offer investors (including small scale investors) access to the expertise of professional fund managers which may otherwise have been unaffordable.
There are quite a number of investment companies dealing in mutual funds in Nigeria; It is advisable to contact any investment company dealing in mutual funds for more information, as this will help in choosing which type of fund to invest in.
Investing in mutual funds is a sure way to grow your income over time. Why spend your money on things that don’t matter when you can invest and build a fortune for your tomorrow....remember, every naira begins with a kobo.