WANT to buy into a few companies but don’t have enough money? Invest in mutual funds.

A mutual fund is a vehicle that pools funds from many investors and buys into different types of securities.

The types of securities purchased depend on the nature of the mutual fund. Treasury bills, bonds, stocks or a combination based on the fund’s prospectus, are all options, said Brian Frazer, general manager of Scotia Asset Management Jamaica Limited.

A major attraction of mutual funds is that small investors who buy into them get access to instruments that they couldn’t afford by themselves, said Sean Taylor, senior research analyst, Barita Investments.

These investments are professionally managed by fund managers who select and monitor the performance of the securities and the fund purchases.

“An investor who is not fully aware of what’s going on with the market and has a regular job, entrusts the fund manager to make investments on their behalf,” Taylor said.

The cost to invest in a mutual fund varies, but according to Frazer, it can be as low as US$1,000 ($93,000).

But not all mutual funds are created equally. The type of instruments selected is dependent upon the investment policy (goals and objectives) of the particular fund.

If you want to invest in a mutual fund, you must first know your risk tolerance, time horizon and liquidity needs.

Because there are many types of mutual funds, investors should match their needs with the most appropriate fund, Frazer said.

If you like, buy into cash, fixed income, balanced or equity mutual funds. There’s no problem in investing in more than one fund, say experts.

The conservative investor who wants to preserve their capital could consider putting their money into a cash mutual fund or money market fund. Those are invested in short-term instruments such as treasury bills and are very liquid.

Cash fund is ideal for persons who need cash in a short period and are typically instruments that mature in less than a year, Frazer said.

If you’re looking to get regular income, the fixed income mutual fund would work for you. These funds, according to Frazer, invest in debt instruments issued by the government or corporations.

Equity mutual funds invest in shares in listed companies, and those generally come with a higher risk.

“The fact that they are invested in stocks, the return is dependent on how the companies perform,” he said.

Investors have a chance to invest in more than one fund and the balance funds provide a mixture of safety income and capital appreciation by investing in balanced funds.

The strategy of balanced funds is to invest in a combination of fixed income and equities.

While you cannot direct the investments that the fund manager makes, mutual funds give individuals currency diversification and choices.

“Funds are available in US and Canadian dollars which allow investors to hedge against devaluation,” Frazer said.

Equity-based mutual funds available to Jamaican Investors are usually tax-free.

“This is a significant saving to consider when evaluating alternate investments,” he said.

What’s more, mutual funds regularly inform investors about the status of their investments. It is important for persons to match their investment goals with the appropriate funds.

“Once your goal is determined, the appropriate mix of funds can be chosen especially for long-term goals such as a house, or education needs,” Frazer said.

There is no “one size fits all” in investing, Frazer said. “Talk to the fund manager about what is right for you.”

Consider how soon you will need your money, the risks you can afford and the geographic regions you wish to gain exposure to.