Start an Investment - Mutual Funds

Through reading any financial book or blog, they will say the same thing; "Start saving and investing when you are young". But the million-dollar question is "How to start investing?"

To answer that question, one will require experience, skills and knowledge before start putting the money to work for you. But it seems so difficult and time-consuming that people always put it away until future unknown date. 

Every thing starts with a baby step and this is what I do. I put aside a fixed proportion of my salary for saving and investment purposes. Half of it goes into fixed deposit and the remaining into a mutual fund by auto direct transfer. In long term, I would have accumulated sufficient fund to achieve my financial goals. How does that sound?

Why I started with mutual funds

1. Diversification
Given a limited amount of capital, it is hard to diversify properly of the investments thus inducing specific risk into the investments. Mutual funds provide a well-diversified portfolios in unit.

2. Expertise and management skills 
Investment managers of the funds are skilled and experienced ensuring your money is invested in well-mannered.

3. Easy
With a professional investment manager, you don't have to track the stock prices everyday. This is suitable for busy people who wouldn't have much extra time.

4.Access to investments that otherwise not available
With the pooling of funds, individual can now access small and big, domestic and overseas investments.

The drawbacks that you need to consider

1. Management fee
Your investment will be charged for the management fees depending on the funds

2. Low return
Mutual funds are for long term investments. If you looking for high risk and high return, mutual fund might not be suitable.

To start investing in mutual funds

1. Decide on the purpose of your investments. Is it for your marriage fund, first home fund, child schooling fund or retirement?

2. Decide on how much risk you can tolerate. This  is affected by your age, nature of income (steady or uncertain), number of dependents and existing wealth.

3. Research on which provider that you wanted to join.

4. Decide on which fund you would like to join. 

5. Read the prospectus of the fund to ensure that you are aware of what risk you are exposed to.

6. Invest in the fund. Decide on whether you wanted to invest in lump sum or regular investment.

7. Put it aside and check it once in awhile. 

It would not happen if you are not starting. Take the first step now by reading more about investments!