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How to invest in mutual funds

How to invest in mutual funds Interest rates are generally low and people are looking for different ways to rate their savings. One option is mutual funds. There is a plethora of products on the market that differ in the degree of risk and the amount of fees. What is good to know when investing in unit trusts?

Clarify the investment horizon

The amount of time you want to invest in your finances is called the investment horizon. It is important for determining the investment tools and the composition of the portfolio. In the longer term, it is more appropriate to invest in dynamic funds that are more fluctuating and carry a higher risk, but in the long run they are more profitable. To invest in the order of a few years, it is more appropriate to use the product more conservative. Therefore, investing more risky and more volatile should be implemented over the next 5 to 10 years. In a short period of time, the investment may lose a large part of its value and the investor will lose.


Effect of regular investment

People should regularly postpone part of their income and make a reserve. Just buying shares regularly can be one way of evaluating these assets. In the case of a regular investment in unit trusts, the so-called cost averaging will take place in the long run. By regularly investing the same amount, a smaller number of Units is purchased when the prices are higher and, on the contrary, a larger quantity when the Units are inexpensive. When there is a slump in the markets, the investor then gets more profitably, because he bought a large part of the units when the price markets were below.


Do not forget the fees

Investments in mutual funds are not free of charge. These are mainly entry fees and management fees. Managerial or management fees cover fund management costs, because fund managers invest the funds best, they must constantly seek the best investment opportunities. Subscription fees are usually payable when purchasing units. "People should be interested in the information contained in the fund's statute, which contains investment strategy and risk as well as all fees," says Miloslav Kufa (Ramfin). "The statute also usually contains the total cost index of the fund, which is called Total Expense Ratio (TER). Its meaning is that it includes all the real costs , " adds Miloslav Kufa, saying that the declared return of the fund has already been cleared from this indicator. The higher the TER, the higher the ratio of the fund's cost to its earnings.


Diversify

Diversification plays a crucial role in deciding where to invest money. It is good to not bind all the money for one card. Therefore, it may be wise to divide your investment not only into various risk instruments - equity funds, bond funds and others - but also to various industries, for example part of IT, part of the mining industry, part of banking, and so on. Another level of diversification may lie in regional distribution where you can invest in emerging economies funds. Diversify between financial products as well. In addition to mutual funds, it is also good to have a reserve on a savings account, or to invest money, for example, in real estate.


Previous yields are not a guarantee of future earnings

There is no investment. If someone tells you where to invest based on a growing graph from previous years, this information does not have any weight. "Past yields are certainly not a guarantee of future returns. On the contrary, a fund that is currently in decline may, at a certain investment horizon, promise better returns than the one that has grown in the last year, " says Michael Pokiser (Ramfin), adding: " Of course, it can not be guided by the graph curve, Choose a suitable instrument according to his preferences. "



Source: tz, edited editorially



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