How Mutual Funds And Self-Directed Investing Go Hand In Hand
Detroit, Michigan
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August 06, 2024 08:45 AM Eastern Daylight Time
By Gerelyn Terzo, Benzinga
The investment world has experienced a significant transformation over the last 20 years. Technology innovation has made it possible for individual investors to trade from the comfort of their own homes, using a computer or even a mobile device thanks to the rise of money apps. And while trading securities is more accessible than ever before, investing can seem overwhelming when you don’t know where to begin.
Nevertheless, more people are dabbling with day trading these days, especially since the pandemic. The number of stock market traders increased from 15% in 2019 to 25% in 2021, and retail investor sentiment hit an all-time high in early 2023 buoyed by the opportunities presented by AI. But picking winning stocks from the multitudes available and trying to time the markets regularly can be a losing game for many. Fortunately, mutual fund investing offers a different approach that can help with these concerns.
In a nutshell, mutual funds are investment products that provide exposure to a
basket of carefully picked securities. As a result, investors don’t have to worry about choosing individual stocks or bonds. Mutual funds harness the capital of many investors,
following a specific strategy to reach clearly defined goals, and also serve as a gateway toward investors eventually making their own calls.
According to the Investment Company Institute (ICI), over half (52.3%) of American households owned mutual funds in 2023, most of whom used them as a way to save for retirement. Mutual funds are popular for many reasons, not least being:
Wealth Building: Mutual funds have played a key role in generating wealth for families over the last 100 years, thanks to their ability to potentially deliver desirable returns with relatively lower effort.
Financial Security: Mutual funds introduce investors to investment options that they might otherwise miss out on, increasing the chances of reaching financial goals.
Diversification: Mutual funds allow investors to gain exposure to any combination of securities across jurisdictions and sectors of the economy. Whether it’s technology stocks, bonds or emerging market securities, there’s a mutual fund for that.
Mutual funds fall into one of two buckets: open-ended or closed-ended funds. While
both types offer investors diversification and securities handpicked by a professional portfolio manager, but there are nuances between them.
Open-Ended Funds: The lion’s share of mutual funds falls into this category. Open-ended
means new shares are constantly being issued to replace existing shares being bought and sold in circulation. There’s no cap. The price of the fund reflects the net asset value, or NAV, comprising the fund’s assets less any liabilities. Investors buy and sell open-ended mutual funds based on the net asset value per share of the fund. Considering the set number of shares in an open-ended fund, the price tends to remain stable.
Closed-Ended Funds: These mutual funds also trade in the financial markets but are more akin to stocks or exchange-traded funds (ETFs). After amassing capital for the fund, the issuer offers a set number of shares in an initial public offering (IPO) that trades, closing the door to new cash to run the fund. Fund prices change during the trading day and therefore can be more volatile, either hovering at a premium (above) or discount (below) NAV.
Axos Invest Has You Covered With A Self-Directed Account
There’s no shortage of ways to invest in mutual funds. But if you are looking to gain greater control over your financial future, consider a self-directed account like the one offered by Axos Invest, the investment arm of digital banking pioneer Axos Bank.
Direct investing means you get to decide when you’re ready to invest. With the exception of the online platform on which you’re investing, there’s no third party between you and the markets to tell you when and how much to allocate. At Axos Invest, this means accessing a straightforward platform as well as commission-free investments including mutual funds.
Investing in mutual funds through an Axos Invest self-directed account gives you the best of both worlds: an opportunity to stay in the driver’s seat of your portfolio and the potential to achieve your financial goals. At Axos, you’ll find access to over 10,000 mutual funds on an intuitive trading platform, plus a host of other services that Axos says other brokers can’t provide.
At Axos, you can forget about high fees, thereby allowing you to reclaim your investment independence. In addition to commission-free trading, an Axos Invest self-directed trading account includes features like minimum balance requirements that typically hover at $100 (many mutual funds have lower minimums).
As a result, one-share purchases in mutual funds are permissible in many cases. And if you’re looking to achieve the compounding effect, similar to dividend investing, take advantage of Axos Scheduler to set up an automatic contribution plan and grow your account.
Once you dip your toes into self-directed investing, you’ll find that Axos will be by
your side the entire way. Their streamlined platform unifies your accounts in one place, making self-directed mutual fund investing as simple and efficient as possible. Plus, you won’t have to leave the platform to perform due diligence on funds because market data and research are only a few clicks away.
When it comes time to decide on a fund, you complete the trade how you see fit. Consider opening an Axos Invest account today, which you can do in a matter of minutes, so you can experience all the benefits that mutual fund investing from a self-directed account has to offer today.
Featured photo by QuinceCreative on Pixabay.
Benzinga is a leading financial media and data provider, known for delivering accurate, timely, and actionable financial information to empower investors and traders.
This post contains sponsored content. This content is for informational purposes only and not intended to be investing advice.
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