Mutual funds professionally manage your savings
The Advocate, Wednesday July 21, 1993
What are Mutual Funds? They can be described in just five words: Professional Management of Your Savings. Simple, isn't it?
Yet people want to complicate things. They want to know what type of investments are included, what it did last year, what we expect in the future, etc.,etc.
I have two simple question I like to ask. First, do you know anything about the inside of your TV set? Chances are you don't.
Some brilliant people in electronics spent several years to develop the right coils, resistors, transistors, microchips and whatever, and put them all together in proper working order and sequence.
All you and I do is touch a button on the remote and sit back and enjoy the results. We don't even have to get up any longer to change the channels.
An extra advantage is the fact that our TV set (investment) is under full-time day by day scrutiny by top experts, and if they see an investment that is no longer performing as it should, they replace it or add additional investments (parts) to improve performance.
Makes sense, doesn't it?
Question two: does it make sense to go to a doctor if you are sick? To a dentist with teeth problems, a mechanic with your car, a lawyer with law problems, a tax expert, etc? I think all of us can agree it makes sense.
Then, doesn't it make sense to go to an "expert" and have that person look after your savings?
That is simply what a mutual fund is. It is "experts" looking after your savings. Not only yours, but your neighbors, the person acros the street, my savings and many others in our community and across the land.
We all put our savings into "one pot" (called a mutual fund), and like the TV sit back and enjoy the results.
Everyone in an investment fund achieves exactly the same rate of return over the same time span. And remember, like any expert or professional, some are better than others.
Furthermore, investment funds operate in a "goldfish bowl" in that their values are published daily in most major newspapers in Canada.
The financial papers such as the Financial Times and the Financial Post publish statistics of what the funds have done in the past one, three, five, and ten years.
What they've done in the past is not debatable, it's published fact, and you and I can check the results ourselves.
The funds also publish their prices on a daily basis. It must give you shares at that price ( if you are buying) or redeem at that price (if you are selling).
The way to make "The World Your Oyster" is to invest in international mutual funds. They afford you with even greater diversification and gains by investing in different countries around the world.
By diversifying in assets throughout the world you reduce your risk and exposure to poor stock market performance in any one country.
In my next column we will talk about professional money managers.
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