There are 3 principal benefits:
- Small amount investment
- You have $50 to invest. But, in most
cases that will only buy you 1/2 shares of a good stock. Plus
the commission itself will eat into your investment ($10 (20% of
investment) is the lowest online commission). By pooling funds
with other investors you can invest that small amount with a lower
costs to asset ratio (C/R ratio). This fund allows you and
similarly minded investors to pool resources to buy that investment
asset.
- Asset diversification - Your overall risk is lowered as you
diversify your assets. Eg, rather than buying 100 shares of
Yahoo, buy 20 shares of Yahoo, 20 of GE, 20 of IBM and so on.
- Sell your investment anytime -
Say you invest $100, but in a month
of so need that money back. However, the asset the fund has
invested in has not matured yet. Fear NOT! You can sell
your share of the asset to any of the fund members or anyone else you
can find. This website lists people who want to sell their asset
and you can bid/sell at this page.
- You choose the asset - The fund manager selects assets which he
feels will return low risk, high ROI. The asset will only be
bought if enough fund members vote to buy it, i.e. if they commit
money towards that asset.
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