- One of the greatest advantages for an investor investing in mutual funds is that of diversification. At times, individuals do not have free cash flow to invest resources in several places such as; bonds and stocks.
Consequently, people can invest their money along with multiple other investors. This reduces the risks for the investor, as he is not reliant on a single source. Apart from this, mutual funds are managed by a hired professional. The individual who has invested his/her money may not have to worry about buying and selling at the right time; since, the professional investor performs this activity. In other words, mutual funds may result in considerable time saving as well (Budgeting Money).
- The Annual Percentage Rate (APR) and Effective Annual Percentage Rate (EAR) are two commonly used methods to understand the time value of money. The loan cost and the annual income from an investment may be explained in terms of APR and EAR.
In this case study, the number of periods in a year is deemed to be cosmic as the match is expeditious. This can be confirmed by the fact that the APR and EAR are infinite (Ross, Westerfield, & Jaffe, 2013).
References
What Are the Differences Between APR & EAR?. (n.d.). Budgeting Money. Retrieved February 19, 2014, from http://budgeting.thenest.com/differences-between-apr-ear-23608.html
What are the advantages of mutual funds?. (n.d.). CNNMoney. Retrieved February 19, 2014, from http://money.cnn.com/retirement/guide/investing_mutualfunds.moneymag/index3.htm
Ross, S. A., Westerfield, R. W., & Jaffe, J. (2013). Corporate finance (10th ed.). New York: McGraw-Hill Irwin.
