Struggling to find the “fun” in “mutual funds”?
Over 4 in 10 small businesses have struggled with cash flow.
There are many ways a business can find its way around this problem, but one of them is through investing in the long term. Mutual funds are one way a business can secure its future.
Here’s our guide to understanding mutual funds and how they can help your business.
What are Mutual Funds?
Mutual funds are a type of managed investment. The mutual fund management company pools investments from a variety of investor sources. The company then uses those funds to invest in a diverse set of securities.
Investors in a mutual fund, such as Vanguard VFIAX, buy gsk shares, and the mutual fund’s value lies in its portfolio – the mundane fund’s combined holdings.
Types of Mutual Funds
There are several different kinds of mutual funds. Let’s take a look at the key ones below:
Money Market Funds
Money market funds are low-risk mutual funds, but also offer low-rewards. They won’t yield huge results, but they offer a safe place to put “spare” money to work.
Most money market investments are in the form of government treasury bills.
Bond Funds
Bond funds invest in (what else?) buying and selling bonds. The outcome of a bond investment can be unpredictable, but bond funds look to maximize returns through smart investment.
Stock Funds
There are many different stock funds, but they share in common their strategy of investing in company stocks. Some look for high-yield stocks with irregular returns. Others focus on industry-specific investments, while some focus on stocks paying regular dividends.
Advantages of Mutual Funds for Business
Mutual funds offer a number of key advantages for businesses. Here are a few:
Easy Management
Most businesses owners don’t want to spend the time managing investments on top of business concerns. At the same time, they want to make business cashflow go further.
Mutual funds offer a hands-off means of investing. The minutiae of management lie with the mutual fund, leaving the business free to focus its efforts elsewhere.
Low Bar for Entry
A company operating with tight margins may not have a wealth of cash to invest. But investment can help carry a company through difficult times.
The answer that conundrum lies in investments with low bars for entry. A company can invest what it can afford. Mutual funds are affordable compared to similar investments, making them attractive for a business without investment cash to spare.
Liquidity
For a business struggling with cash flow, liquidity is paramount. You can’t liquidate most of your assets, especially if you’re an online business. You can’t put your website and social media presence up for sale. Liquidity describes the ease with which an investor can redeem their assets.
A business that needs money can redeem their shares in a mutual fund with relative ease, returning their investment to them for business use.
Understanding Mutual Funds the Easy Way
Understanding mutual funds doesn’t have to be complicated. With this simple guide, we’ve already covered the need-to-know basics. Based on this, you should have some idea about whether mutual funds are right for you.
For more help growing your business, check out the rest of our blog. We can help protect you from cyber attacks and build a webpage that attracts customers, giving you more money to invest.
