Mutual funds in most cases are believed to take the pain out of investing. You don’t have the time to sit and track stocks every day. Get some mutual funds and let them handle the hard work for you.
There are three main options under which mutual funds come:
The first kind provides growth, the second has its focus on dividend and the third kind that reinvests dividend that you obtain.
Growth mutual funds
Growth mutual funds are popular because of the limitless options it gives you to grow your money. Just like compounded interest, the entire fund’s growth or interest is added to the principal value periodically. You receive a lump sum where the principal and growth amount both have grown.
Dividend mutual funds
Dividend option is another good one that could be chosen based on your needs. Based on the dividend received from the company you will receive payouts periodically. It’s an awesome option to generate a good amount of monthly income without much work.
The dividends are performance based income and it isn’t guaranteed though. It all depends on how the company performs. Depending on a range of global and local factors the performance can subdue and consequently dividends can suffer.
Dividend reinvestment mutual funds
The final option is dividend reinvestment, where the dividend got from the companies is reinvested back. You don’t get periodic returns. The benefit is in the possibility of sum bigger than the principal amount with all the years of dividends invested back.
Mutual funds are subject to market risks despite them being led by the brainiest brains in the world.
Based on your preferences you can choose one that would meet your investment goals and provide for your retirement or other long-term goals.
What do you think?