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What is a mutual fund?

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What is a mutual fund?

All about mutual funds

The mutual fund is one of the most popular ways of investing in the stock market. It is one of the best investment options for someone who wants to create wealth. It is a known fact that investing in the stock market can yield the highest returns. Buying stocks is risky and it is difficult for a layman to know which stocks will yield good returns and which won’t. Regular tracking of your stock investments is essential,as you never know when the company you have invested in may face problems. This can make you lose a lot of money.

Those who are worried about the risk involved in the stock market or don’t have the time to track the market regularly can opt for mutual funds. As the name suggests, a mutual fund is where many investors pool their money to create a fund for mutual benefit. This fund is then used to invest in the stock market, as well as other instruments like bonds and money market instruments. An established investment company runs the fund and it is managed by a professional fund manager.

The fund manager has expertise and experience in dealing with financial markets. He invests the fund to create a portfolio so that it yields handsome returns for investors. Depending on the objective of the fund, the portfolio would contain a mixture of stocks, bonds, and even cash. It is the fund manager’s responsibility to buy stocks, track its performance periodically, and make changes in the portfolio as required.

Benefits it offers

As the value of the portfolio goes up, so does the value of the investments by individuals. An individual investor benefits by investing in mutual funds in the following ways:

  • To buy shares in a top company, an investor may need a huge sum of money. Mutual fund investment can be done with even with $500. You are not buying stocks here; you are buying shares or units of the mutual fund and can thus invest a lower sum of money.
  • You need not worry about which stocks to buy, when to buy, and when to sell. A professional manager is on the job with the sole aim of ensuring appreciation in the fund value.
  • It is the fund manager’s responsibility to regularly monitor the stock market and performance of companies. Any changes to the portfolio arethe responsibility of the fund manager. As an investor, you can invest your money and relax.
  • Various types of mutual funds are available that cater to different needs of investors. You can invest in the fund type of your choice.
  • You can sell your shares in the mutual fund anytime. The value of the shares as on that day will be used to compute how much you have earned.

Types of mutual funds

As mentioned above, there are different types of mutual funds available. Depending on your investment goals and your tolerance to risk, you can invest in any of them. You can diversify your investments by investing a little money in 3 or 4 funds instead of putting all your money in one fund. This diversification helps you reduce your risk. The fund manager, in turn, buys different types of securities, diversifying further. This is how investing in mutual funds are less risky as compared to direct purchase of stocks.

Some of the popular mutual fund types are:

  • Growth funds are those whose objective is to make the investment value grow by investing in companies that are expected to grow.
  • Value funds are those that invest in value stocks that usually sell at a lesser price. The objective is to create value by investing in these funds.
  • Large cap funds are those that invest in big companies that have a large market capitalization.
  • Mid-cap funds invest in companies with a moderate market capitalization size. These are companies poised to take off.Investing in mid-cap funds can be risky, buy it can also yield the highest rewards.
  • Small-cap funds are small-sized companies. Their stocks are usually available at low rates and they can be a very good investment.
  • Bond funds are those that invest money only in bonds. It could be government bonds or bonds issued by companies. The returns would be less and so would the risk.
  • Sector funds invest money in buying stocks of a particular industry sector. An IT fund would buy stocks only of IT companies. This is a good investment when a particular sector is predicted to do well. It is risky as you can make losses if the industry sector under performs.
  • Index funds are very popular. They invest money in stocks that form the stock market index. For example, S&P 500 is a popular stock market index that contains 500 top stocks. An index fund could invest in the same stocks as the S&P 500. This ensures that the performance of the mutual fund mirrors that of the stock market index.
  • Hybrid funds are those that invest in both stocks and bonds in varying ratios. They help to balance risk and safety.

How it works

If you want to invest in a mutual fund, you can buy them directly from the investment company or by opening an account with a brokerage. Instead of investing a large sum at one go, you can consider systematic investment. Here, you decide the funds you want to invest and the amount to invest every month. You can give a standing instruction to your bank and every month the said amount will be debited to buy shares of mutual funds. You can thus invest systematically month after month.

This is a disciplined approach to investing.When the fund value is low, you can buy more shares in the fund. When the fund value is high, your overall value increases. Regular investments for a long period help you to earn more money, thanks to compounding. This is an ideal way to invest in mutual funds.

Mutual funds are a boon for small investors, who can invest small sums of money to create wealth.

Investing

Reuters Events Launch Global Investment Summit Online Edition Uniting Institutional Investors, Asset Owners & Financial Institutions

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Reuters Events – today announced the agenda for their Global Investment Summit (Dec 3rd -4th). The 2-day strategic summit has been reimagined in the era of social distancing and will be broadcast free of charge to the public.

This Summit, with a diverse range of international voices and anchored by Reuters News-led sessions, is the only place for institutional investors, asset owners and financial institutions to come to terms with the events of 2020.

Click for more information and for complimentary registration to the online edition

The Energy Transition team report an industry leading speaker faculty for 2020, including:

  • Eileen Murray, Chair, Finra
  • Philip Lane, Chief Economist, European Central Bank
  • Gregory Davis, Chief Investment Officer, Vanguard
  • Hanneke Smits, CEO, BNY Mellon Investment Management
  • Pascal Blanque, Chief Investment Officer, Amundi
  • Desiree Fixler, Group Chief Sustainability Officer, DWS
  • Joe Lubin, CEO, Consensys
  • Bahren Shaari, CEO, Bank of Singapore
  • Mark Machin, CEO, Canada Pension Plan Investment Board

The agenda released by Reuters Events Investment is both ambitious and comprehensive, and will cover four key themes: Market Outlook, Asset Management Strategies, Industry Deep-Dives and the Future of Investment.

View the full agenda here

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Halliburton & Baker Hughes CEO’s join Reuters Events: Energy Transition 2020

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Reuters Events – today announced that CEO’s of two of the world’s leading energy service companies, Halliburton and Baker Hughes, will join the speaker faculties for their flagship Energy Transition Summit.

The event will explore the creation of the future energy ecosystem and offer companies, from across the asset spectrum, a definitive guide to their net-zero strategies. The alignment of the two biggest O&G global service companies, Halliburton and Baker Hughes, represents a significant step in the transition to low-carbon energy

More information on the Europe and North America editions can be found below. Registration for the LIVE stream is free.

Alongside their CEO speaker representation, Halliburton join as Platinum sponsors of the North American edition. Baker Hughes join as gold sponsors for the European edition of the flagship energy transition program.

The Energy Transition team report an industry leading speaker faculty for 2020, including:

  • Lorenzo Simonelli, Chairman & CEO, Baker Hughes
  • Jeff Miller, CEO & President, Jeff Miller
  • Tristan Grimbert, CEO, EDF Renewables
  • John Pettigrew, Chief Executive, National Grid
  • Pratima Rangarajan, CEO, OGCI Climate Investments
  • Alex Schneiter, CEO & President, Lundin Energy
  • Gretchen Watkins, President, Shell Oil Company
  • Calvin Butler Jr., CEO, Exelon Utilities
  • Francis Fannon, Assistant Secretary ERB, S. Department of State
  • David Lawler, Chairman & President, bp America
  • Andreas Schierenbeck, CEO, Uniper

More information on the Europe and North America editions can be found below. Registration for the LIVE stream is free.

Governance & Cooperation – Does the energy transition face a ‘governance deficit’? To understand how the energy transition will develop over the next decade, it is crucial to understand the driving governing forces behind it. Will the Green Deal provide the first domino, how can we ensure progress in the shadow of Aberdeen and ensure that we translate targets into action?

Financing Energy Transition – We must address the elephant in the room; who is going to pay for it all? An understanding of where the funds are likely to come from is key to staking claim to the infrastructural projects that will redefine the modern world in the 21st century.

New Energy Infrastructure – Low-carbon energy supply and consumption will need a radical overhaul of infrastructure. As well as revamping the old, we’ll need entirely new assets and new systems of energy delivery. It’s an unprecedented opportunity with estimated spending at $70 trillion over the next decade. Knowing which technologies are ready to be scaled first is the key to understanding opportunity

Business Model Innovation – Who will provide leadership through the age of transition and how do we want our future energy system to look? Speed and timing will be crucial if you are to stay on the right side of the transition. Join us in setting business led, evidence based, targets as industry drives towards net-zero

More information on the Europe and North America editions can be found below. Registration for the LIVE stream is free.

At Reuters Events, we’re committed to tackling the Energy Transition head on; to shed light on the defining issue of our time and help energy companies meet a uniquely difficult challenge. That is, to be both an energy company of today, and the energy companies of tomorrow. In a period that will be defined by uncertainty we can, together, lighten the way forward.” – Owen Rolt, Head of Energy Transition, Reuters Events

Contact

Owen Rolt

Head of Energy Transition

Reuters Events

UK: +44 (0) 207 375 7596

E: [email protected]

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COVID-19 is changing people’s preferences when it comes to BTL investments

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COVID-19 is changing people’s preferences when it comes to BTL investments 1

By Jamie Johnson, CEO of FJP Investment

Throughout 2020, investors have had to navigate increasingly treacherous and volatile market conditions as a consequence of the COVID-19 pandemic. No country has been immune to the coronavirus outbreak, particularly here in the UK.

Yet even as the country enters another phased lockdown of sorts, demand for UK property has remained strong. After a brief period of suppressed demand after initial lockdown measures were introduced in late March, the UK’s implementation of the stamp duty land tax (SDLT) holiday triggered a rush in demand for bricks and mortar. As a result, both house prices and transactional activity is rising.

With this new surge in demand resulting in an 18-year-high of UK house price growth, according to the Royal Institute of Charted Surveyors, buy-to-let (BTL) investments have also substantially increased in popularity.

It’s easy to understand why. BTL investments offer landlords both long-term capital growth and regular returns in the form of rental payments. And now, as the SDLT holiday deadline beckons closer, investors keen on taking advantage of the comparative discounts on offer must act quickly.

My advice to those considering a BTL investment in the UK is to understand and appreciate the longstanding market changes that have been brought about by COVID-19. Traditional BTL hotspots are being challenged by a rise in tenant demand for real estate in up-and-coming cities and regions.

For example, the COVID-19 pandemic has resulted in the majority of the workforce working remotely from home. Recent data from property listing site Rightmove makes clear the shift in demand away from central London and towards less densely populated regions; with areas like Cambridge and Oxford seeing 76% and 64% more rental searches respectively and searches in areas like Earl’s Court dropping by 40%.

This is the clear result of previously London-based professionals realising the benefits of working from home. As businesses identify the financial drawbacks and COVID contagion risks of having all their staff physically present five days a week, employers will seek out smaller commercial workspaces.

At the same time, we are also seeing workers looking to rent larger, cheaper properties that might be further away from their office. This is due to the fact that they are unlikely to need to commute every working day to their office, even once the COVID-19 outbreak has been contained.

But, where exactly are the best larger, cheaper properties to be found? Where are the UK’s emerging BTL hotspots that need to be on the radar of prospective investors? I explore these pertinent questions below.

Liverpool life

Those who have been closely following the UK’s housing market will know just how primed Liverpool is for BTL investment. As a key recipient of the UK Government’s Northern Powerhouse funding, and with massive developments like Liverpool Waters and Wirral Waters soon to be completed, the city’s housing supply is ready to meet the demands of those taking part in the aforementioned London professional exodus.

With Liverpool constantly ranking No.1 in rankings of UK cities for BTL investment, it’s evident why investors would be keen on completing purchases of Liverpool property before the end of the SDLT holiday. Though even after the SDLT holiday ends, there’re still plenty of reasons to be optimistic about Liverpudlian BTL investment. Prime Minister Boris Johnson’s government is firmly committed to ‘levelling up’ the North of England through regional regeneration, and planned high speed rail connections between Liverpool and other northern cities will only add to the investment potential of the city.

Leeds living

Although Liverpool boasts the highest rental yields for BTL landlords in real terms, Leeds was recently named the most profitable city to become a landlord in the whole of the UK by CIA landlord. By evaluating numerous metrics; including mortgage costs, average rent, average monthly landlord costs and average property prices, they determined that Leeds was the best city for potential buyers to make their first foray into BTL investment.

And, looking at recent trends, it’s easy to see why. Leeds may benefit more from the London exodus than other cities due to its unique position of being a brain gain city’, i.e. one where more students remain after graduation than move away. As a result, it boasts the largest financial services sector in the nation after London, making it an ideal locale for employers in the financial services sector who are seeking cheaper commercial rent outside of London; likely bringing investment and employees with them.

With its strong urban economy likely to be bolstered by its designation as a ‘Northern Powerhouse’ leading business hub, Leeds is ideally positioned for BTL investment over the long-term.

Cardiff’s regeneration

And finally, the capital of Wales brings much to the table when deciding between different BTL investment destinations. With a metropolitan area population of over 1.1 million residents, forecasted to grow by 20% by 2035, demand for property in the city is set to rapidly increase over the next decade. Those able to capitalise on this population growth will be able to access considerable long-term investment opportunities – as recent reports suggest.

Thankfully, it’s unlikely that there’ll be any shortage of housing supply in Cardiff for BTL investors to invest in. Cardiff Bay has emerged as Europe’s largest waterfront development, and the upcoming Central Quay and £500m coastal developments will assist in attracting further investment into the city.

BTL remains a sound investment opportunity

COVID-19 has made evident just how resilient British real estate is as an investment asset. By offering the best of both worlds, namely long-term capital growth and regular rental returns, BTL has successfully remained an attractive and popular investment choice. And, with demand for housing still outstripping supply, the market need for rental accommodation looks set to only grow.

COVID-19 has permanently changed the UK’s housing market and, as explained above, new BTL hotspots are surely due to emerge over the next year. With renters seeking out larger homes in cheaper areas, flexible working patterns will forever change the landscape of the UK’s residential real estate market, and those able to capitalise on it may benefit hugely as a result.

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