Funds in their vast rich diversity are a steady and sure way of enjoying returns on your investments. Unfortunately many willing investors lack the necessary time and skills to invest in stocks and other financial instruments. However, if you fall under this category, you honestly have no reason to worry because you can still trust professional fund managers to invest for you while you enjoy a passive income. So why are enjoying the fruits of funds a better channel of income and financial freedom? Well, as this chapter progresses I will answer this question and explore the benefits of investing in funds. I will also show you the difference between regulation A and D funds. Now I welcome you to join me as we learn how to use these financial instruments to achieve financial freedom. 

Liquidity: First, you can buy and sell units in a mutual fund any business day of the week. This allows you to access your cash easily.  

Flexibility: Second, fund managers manage different funds such as money markets and global funds. Also, they permit you to switch between them at minimal or zero cost. This way, you can change your portfolio balance to suit your personal requirements, financial targets and the prevailing market conditions. 

Diversification of Risk: All types of investments have their own unique risks. Therefore, it is necessary to mitigate them through diversification. Professionally managed funds have several investment options. Moreover, fund managers can spread them across various states, countries, industries and firms. This way it is easy to reduce the extent of damage arising from a fluctuation in an investment’s market value. Take this example: You invest $500,000 in company X’s stock and a fund manager invests the same amount (in two equal measures) in companies X and Y. Suddenly, the market value of company X’s stock falls by 20 percent. As an individual investor, you would lose $100,000 while the fund manager would lose only 10 percent of their investment. 

Affordability: Funds are better investment vehicles because they are more affordable. The reason is that they allow you to start by buying units with a lower amount. For example, we require a 100-share minimum with a $4.20 share price or $420 in our Alchemy Kings Fund. Additionally, others allow investors to purchase smaller monthly units, such as $50 a month. This way, you don’t need to accumulate millions to start or continue with your investment plan. 

Professional Management: Professional management is another benefit you enjoy by investing in funds. Professional managers who manage these funds are specialists in selecting and maintaining different investment portfolios, they have many valuable external connections and they access vital information that updates them. Therefore, they are in a better position to make prudent decisions that give investors value for their money. Don’t also forget that these managers have vast experience in their chosen markets. This way, they get a competitive advantage that benefits investors who want to harvest in markets or industries in which they have inadequate or no experience. 

Greater Purchasing Power: Fund managers manage and pool together funds from many investors. This enables them to buy in bulk, hence, they enjoy better deals on behalf of investors. This way, investors enjoy economies of scale and better returns on their investments. Also, they allow you to make substantive savings you would not have made by investing directly. For example, they buy and sell in bulk more regularly. This means that they have a higher bargaining power that allows them to negotiate for lower transaction costs. Reduced costs mean that they enjoy higher profitability that spills over to you as an investor in the form of better investment returns. 

More Choices: Additionally, investing in funds is better than doing it yourself because it allows you to enjoy more choices. The reason is that funds provide various schemes that cater to your personal needs as you age. This means you can sit down with your fund manager and ask them to reorganize and refocus your investment as per your current needs. For instance, your investment needs and opportunities during your early 30’s may not be satisfactory in your 50’s as you near retirement. 

Tax Efficiency: We all don’t like the taxman even though we grudgingly allow him to drop his ax on our hard-earned cash. After all, who would not celebrate the least opportunity to keep the taxman’s ax away from their money? With funds, you get an opportunity to do just that. These investments allow you to enjoy greater tax efficiency compared to direct personal investment.  

Access to International Markets and Investments: Do you want to make international investments without traveling the world or owning big businesses across nations? If you do, then funds are an easy and viable means of reaping the wealth of the nations without making any direct contact with them. With established fund managers at your side, you can access prime markets with minimal investment and reap maximum returns. The reason is that these managers have international connections and exposure in the international investment arena.  

Convenience: Lastly, you enjoy what every investor wants and deserves – convenience. With a fund manager working for you, they will buy, sell, do paperwork, collect income and make the right decisions on your behalf. The manager will also take the time to regularly account for all these activities and update you on the proceedings. 

If you are craving the convenience of investment, an opportunity to invest and reap benefits internationally, and enjoy the perks of tax efficiency, then funds are the right tool for you. Also, fund managers can help serious investors to reap returns in industries, markets and nations in which they have no exposure or experience. With that in mind, let’s turn our focus to the last part of our discussion: the difference between regulation A and D funds. 

Regulation A and D Funds: What Is the Difference? In this closing section, I show you how regulation A and D funds differ from each other. 

 Regulation A Funds: Regulation A funds are exempted from some of the registration requirements of the Securities Act. These exemptions apply to the public offering of securities below the $5 million mark in a year. However, a company offering stocks under this regulatory arrangement is supposed to file offering statements with the Securities and Exchange Commission (SEC). But notably, a company in this category enjoys exemption advantages over companies that follow all the registration requirements the SEC set. When issuing their offers, regulation A companies should give investors documentation that accompanies their issues.  

  • What the regulation entails: 

Even though companies that fall under this category go through rigorous documentation requirements, they still enjoy many other benefits that override them. For example, these companies enjoy more streamlined financial statements with no audit obligations and they don’t have to provide the Exchange Act reports before getting more than 500 shareholders and an asset base exceeding $500 million.

As an investor, it is necessary to know that the amendments made to the Act in 2015 allow these companies to earn in two different tiers. Both forms of investments in these tiers work under state and federal government regulation. In the first tier, these companies can float a maximum of up to $20 to the public within a year. Here, the firms will produce their offering circulars and file them with the SEC. However, such businesses are not obligated to provide regular reports because the regulation requires them to issue reports on the final status of their offerings. 

Under the second tier, the regulation allows firms to issue offers of up to $50 million within 12 months. Unlike those operating under the first tier, companies under this category should provide regular reports on their offerings as well as their final status.  

Regulation D  Funds: Regulation D companies are exempt companies that are out to raise less than $1 million from the capital markets within a period of 12 months. Companies under this category may offer and sell their securities without registering their transactions. The regulation exempts companies that want to raise money up to $5 million if they fail to sell to more than 35 people. 

 This regulation is ideal for private companies or entrepreneurs since they enable them to get funding quickly while avoiding the cost of floating an IPO. 

A company seeking to raise funds under this category needs to file a Form D. This document contains the names and addresses of its directors and executives. It also contains information about its offering after selling its initial securities. However, companies under this category don’t enjoy exemption from anti-fraud and civil liability. Also, these companies are still subject to compliance with necessary state laws regarding offers and securities sales. The advantages of this regulation don’t benefit the issuer’s affiliates or other individuals reselling their securities. Also, any exemption under this category only applies to transactions; the securities are exempted.