Time to Invest in Mutual Funds
Rashedul Hasan Yasin :
Building wealth does not necessitate substantial savings or complicated strategies. Instead, it is about consistent investing, discipline, and time. Mutual funds make this journey simple and available for nearly everyone.
Mutual funds gather money from many investors and invest across different assets like shares and bonds.
This helps to spread out risk. By diversifying investments across various companies and sectors, mutual funds lower risks and can provide good returns for investors.
Systematic Investment Plans (SIP)
One of the best features of mutual funds is the Systematic Investment Plan (SIP). SIP allows individuals to invest a small, fixed amount each month over a long tenor.
This approach means someone invests through all types of market conditions, i.e., both highs and lows, erasing the need to time the market and smoothing out the investment journey.
It encourages saving regularly, and even a small monthly amount can grow significantly over time with patience.
Warren Buffett famously said, “Someone is sitting in the shade today because someone planted a tree a long time ago.”
These steady investments can help somebody reach major life goals, like buying a home, funding education, planning wedding or managing unexpected expenses.
Growth-Oriented Funds
For young people starting their careers, mutual funds are particularly useful. They have the time to stay invested for many years, and taking some investment risk is wise because short-term market fluctuations matter less over long periods.
Equity-oriented mutual funds can steadily build wealth for those who hold investments patiently. As Charlie Munger often reminded, “The big money is not in the buying or the selling, but in the waiting.”
Balanced Funds
As people move through life, their priorities may shift from aggressive growth to seeking stability and income.
During this stage, a balanced approach, mixing equities with fixed-income assets together, can help protect capital while still allowing for reasonable growth and regular income.
Balanced or income-focused mutual funds offer more stability, particularly for those with a lower risk appetite or capacity.
Compounding and Diversification
Investing in mutual funds does involve market risk, as investments can rise and fall in value. However, a longer investment horizon can lessen the effects of short-term losses.
Over time, the returns earned on earlier investments begin to generate their own returns at the later phase, known as Compounding.
This is a powerful tool for building wealth. Even investing small amounts early can harness compounding, giving your money the time it needs to grow significantly.
Good investment also means avoiding the mistake of focusing all savings in one place. Mutual funds typically spread investments across various instruments, helping to reduce overall risk. This diversification balances out concentration risk for investors.
Why Invest Now?
Now is a prime moment to consider investing in the capital market through mutual funds, as inflation has started to ease and interest rates are expected to fall as we move along. This makes for a favourable environment for future business growth.
Mutual funds allow someone to start with small amounts, spread risk investment risks across many companies through investment diversification, and benefit from professional fund management.
Currently, markets are at historically low values, presenting a rare chance to invest before anticipated growth.
With expected political clarity and structural reforms paving the way for regaining confidence in the economy, early investors can benefit from the next growth cycle instead of chasing it later.
Midland Bank Mutual Funds
The Midland Bank Growth Fund and Midland Bank Balanced Fund, managed by Midland Bank Asset Management Company Limited (MDBAMC), provide structured, research-driven avenues run by experienced investment management professionals to build wealth through the Bangladesh Capital Market. These funds cater to different life stages and risk levels.
The Midland Bank Growth Fund focuses on growth-oriented equity securities, appealing to investors willing to take on higher risk.
Conversely, individuals willing to take lower risk can prefer Midland Bank Balanced Fund, which merges equities with fixed-income assets to provide more stable, income-generating options.
Lastly, building wealth takes time. Small, regular investments over a longer period can build significant financial strength.
This aligns with Warren Buffett’s idea of “third-level income,” where the invested money works continuously for an investor instead of relying only on active work. So, let’s take the first small step and invest in Midland Bank Mutual Funds.
(The writer is a Fellow of the Association of Chartered Certified Accountants (FCCA) and the Chief Operating Officer at Midland Bank Asset Management Company Limite)