Why People Entrust Their Funds With Mutual Funds?

Full and Actual Question: Why does anyone place his/her funds in the hands of financial services companies?

Dear Friend!

I presume you ask this question in the context of entrusting our funds for investing and when you say ‘financial services companies’ you mean mutual funds, and proceed to answer the question.

Investing requires requires knowledge and experience. I would not very difficult to acquire both but requires consistent effort and time. Many cannot afford to study investing for themselves for various reasons and therefore mutual funds came into existence. Now over many years the mutual funds have acquired wide acceptance and today are managing funds to the tune of hundreds of billions of dollars globally, offering a wide variety products in the equity, debt and hybrid funds.

The problem with mutual funds is that they charge very high fees for managing the funds. ‘Exchange Traded Funds (ETFs)’ are a special type of mutual funds where the management fees are quite reasonable.

In conclusion since a majority of the people do not have the investment knowledge and experience, the entrust the job to specialists. Investment knowledge is not very difficult. If you want to learn investing, please first read the book ‘The Intelligent Investor’ by Benjamin Graham. Please also visit my blog ‘Value Investing’ and slowly and gradually you will become an expert and become rich and wealthy too. Happy learning!

Thank you,

With Best Regards

Anand

Please Note: This is almost a reproduction of the question I had answered on the website ‘Quora’, which I thought could be useful to the visitors to this blog site also.