Creating Your Own Mutual Fund is Easy

by : Larry Haywood

Would you like to produce your own custom-made mutual fund? Want to take command of exactly what your money is being invested in? It is in reality quite practical to do this. It is known as a synthetic fund. You are able to produce whatever kind of fund you want, and buy any holdings you like. If you make an index fund, you will be able to choose to leave out any companies that you do not want included. A few folks omit companies that they think are not going to do well in the future, or even companies that they find politically or socially incompatible.

There are a a couple of reasons that you might prefer to establish your own mutual fund. Firstly, you will not have to pay the entire costs that you would have to pay for a professionally managed fund. Because you will not have employees and buildings and such, it will not cost much to start and sustain it. The only actual cost required is the fee or commission it costs you to buy the stocks. You'll likewise be in control of additional factors, such as minimizing capital gains so that you can trim down your taxes, and the tax efficiency of the fund.

Naturally, there are a few issues that you need to think about before you go down this path. For instance, you'll lose some of the better features of traditionalistic mutual funds, such as the diversification factor. You may not be able to purchase enough shares in a broad enough assortment of companies to be as diversified as a standard mutual fund. In addition to, you lose the professional management that mutual funds provide. These two primary factors are a big part of why mutual funds can be so prosperous and are widely believed to be among the safest investment vehicles that you are able to commit your money to.

Whenever you decide to make your own synthetic fund, there are a great deal of companies that you'll be able to use. Among the hottest is ShareBuilder. They only charge $4 per investment at the time of this publishing, making them very attractive. They also allow the purchase of fractional shares, meaning you can buy less than one share in a company. For instance, whenever you wanted to buy shares in fifteen different companies, and each of those companies presently had stock at a hundred per share, you'd need fifteen hundred just to buy just one share in each company. If you only had a thousand to invest, you'd not be able to do this. But using a company like ShareBuilder will allow you to buy less than one share. Two other companies that allow the purchase of fractional shares are BuyandHold, and Folio[fn].

There are many benefits to be had when you decide to create your own mutual fund. As you can see, it is quite possible for you to get started with your own mutual fund if that is the path you choose to take.