Financial Planning

There are how-to books regarding just about any topic imaginable and that includes starting a mutual fund. An individual excited by the world of finance may find this to be the perfect business venture. It takes a lot of money, time, and energy to do, but if it is successful, it can be both financially and personally rewarding.

The cost to start a mutual fund averages approximately $150,000 during the first year, so it is not for those who do not have deep pockets or the ability to get the necessary funding. Until enough money has been collected to offset operation costs, entrepreneurs are forced to subsidize the fund themselves or increase expenses. This second approach will often deter the very investors the fund so desperately needs.

With all of the complexities and regulations present in the investment industry, starting a mutual fund is not an undertaking for the weak of heart. The entrepreneur must first develop a business plan and obtain the money necessary to start the fund. The next step is to retain a lawyer and accountant skilled in these matters, who will assist with filing the necessary documents and preparing a presentation for the NASD. Once NASD membership and other necessary approvals are granted, marketing, compliance, and internal audit staff must be hired, or these duties should be outsourced. Licensed sales representatives and customer service staff will also need to be brought on board.

The portfolio management and trading employees hired should be experienced because their reputation will help sell the fund to prospective investors. They can also advise the entrepreneur on the most successful types of funds to offer. A skilled lawyer may also provide useful advice and in these situations will be helpful by making sure everyone remains in compliance throughout the process.

Once the fund is established, the marketing begins and the approach needs to emphasize the investment strategy and research process of the fund. There is a continued need to attract more investors to the fund, so ongoing marketing efforts are key.  Due to the daunting nature of this process, some entrepreneurs opt for starting an investment partnership like a hedge fund because it costs less and is subject to fewer regulations.