Investing in Mutual Funds

I have been looking at Mutual Funds for quite some time and finally decided to start investing in them last week. Before I go on to the details, it might be useful to note that Mutual Funds can also be referred to as Unit Trust. However, according to Google, there are much more websites that used the term Mutual Funds than the term Unit Trust. Also, more people searched for the former term, therefore I will follow suit with the majority and use the term Mutual Funds. With the term clarified, I will rattle on about my first experience with investing in Mutual Funds.

I first found out about Mutual Funds six years ago, but I was underage to get an investing account at that point of time. In Singapore, the minimum age to get an investment account is 21, simply because of legal reasons. Nonetheless, I was interested in all forms of investing and took quite a good look at that point of time. At that time, I made a few trips to the library to read about investing in stocks, options, futures and also Mutual Funds. I was not particularly in Mutual Funds because their returns were not any nice figures and I strongly believed then that I would start investing in stocks myself. However, one year after I reach the minimum age, I still did not start any form of investing and I decided that I have to put my money to better use.

If I were to pick stocks myself, I would probably spend quite a lot of time on them and it would not be really worth the effort considering my low investment amount. I can’t start investing in Options and Futures, since such instruments of leverage are highly risky if not managed properly and I’m quite risk-averse now. Therefore, I figured that I just want a low-risk instrument with reasonable returns that does not take up too much of my time to monitor. With that investing objective in mind, I went back to look at Mutual Funds and as suspected, most funds did not beat the index. It made me think of looking at the U.S market for Mutual Funds, but still… I decided to give Singapore another chance. Therefore, I lowered my criteria and looked at funds which have performed reasonably well in the past 5 years.

Quite a few of them were pretty outstanding and considering that most parts of Asia is expected to do well, it might be a good idea to start investing in these funds. However, I didn’t forget that I wanted a low risk portfolio, so I picked a few regions to invest in and selected one fund from each region. Investing in Mutual Funds offers the benefit of diversification already, but the drawback lies in the fact that it’s very difficult to know if a fund manager will perform and the high sales charge. Regardless, there is the fund prospectus to get an idea of the fund manager’s investing style and whether you agree with his investing approach. With that, I picked a few funds and invested in the first one. Over the next weeks, I will gradually invest in the other funds that I picked and I would have fully diversified over half the world. I didn’t buy all the funds together since I want each fund to show the money as paid before I invest in the next fund. Haha, I’m weird, ain’t I?

Although I’m investing in Mutual Funds, I think it’s very low risk, since I’m investing in many different regions. With that said, I understand that risks are still involved, but I’m comfortable with this level of risk. Besides putting my money to better use, the other reason for investing is to stop my spending habits. I have been spending way too much for the past year and I want to lock up my money and force myself to be thrifty. With that said, if I don’t start making more money in Internet Marketing in a year, I will have to start looking for a holiday job to support my minimal expenses. Therefore, I’m also investing to push myself more, making it a must for me to start making money in the next holidays with Internet Marketing.

Haha, there are quite a few benefits to investing in Mutual Funds, but there are the drawbacks too. Imagine that the first day you invest in the fund, the sales charge takes away a decent percentage of your money. It’s really heart-wrenching to pay $100 sales charge and I have to go through it two more times, since I’m going to be investing in a total of 3 funds. With that, my bank account will be almost totally emptied and I have to get used to seeing a lower balance each time I use the ATM. The emotional reluctance is there, but for the sake of all the benefits, I just have to commit myself to this plan.