The Top 10 Reasons to Invest in Mutual Funds
Everyone who follows the financial news has heard of mutual funds and knows the stock market has generally risen (with various ups-and-downs) for over 200 years. In fact, by most measures, the stock market has made more money for more people, and done it more reliably, than any other investment over the past 100 years! If you want to accumulate substantial wealth, you must include stocks in your investments!
But, most people who "invest" don't study the market. They don't understand it, and they don't have time to manage their portfolio wisely. That's where mutual funds come in. I respect that other people have other opinions, and certainly not all mutual funds are well managed - you MUST choose wisely and use appropriate caution! But, for most folks, a good, solid, boring mutual fund is the golden path to riches.
Here are my Top 10 reasons to us mutual funds:
1. Selection. You can select from thousands of funds (you'll find one to suit your needs) and you can get information on them easily. Magazines like "Money" are easy to find. Most credit unions have information, and your local library is a goldmine - and there's the Internet.
2. You Can Start Small. Most mutual funds will let you start with less than $1000, and if you set it up for automatic deposits, some will let you start with only $50. I've spent more than that in a restaurant! There is NO reason not to consider this!
3. Simplicity. You deposit 10% of your income every month. Just pay yourself first, then pay the mortgage, then pay everyone else.
4. Professional management. I don't always have time to research, select, and monitor individual stocks. So, I pay a professional a small fee to do it for me. A good fund manager will make you rich!
5. Compound interest. Depending on what index you pick, the U.S. stock market has gone up an average of over 12% per year for the past 10 years, and it's been almost that high for the past 20 years. The market fluxuates, but the beauty of this is, you don't care! Over 10, 20, or 30 years, the system works every time!
6. Dollar-cost-averaging. The details are complicated, but by investing every single month, whether the market is up or down, you get a tremendous boost from the mathematics. Your "average cost" will always be less than the "average price" you paid! And that is money in your pocket!
7. Diversification. A broad-based growth fund typically invests in dozens of companies in different industries, sometimes even in different countries around the world. If one stock goes down, hopefully dozens of others will go up. There is excellent protection and sound risk management built-in to these funds.
8. Specialization. If you prefer, and if you do the research, there are funds that invest in only a very small number of companies. If you can accept the additional risk, you can invest in one particular industry, or one country, or in companies of a certain size or that are environmentally responsible. This specialization offers the potential for even greater profits, but it can also bring greater potential risk. Study before you invest!
9. Fund "Families". Most mutual funds are offered by management companies that sponsor several different funds, with different objectives. They make it easy to move your money between funds, so as your goals change, you can adjust your investements with a quick phone call, or on the Internet.
10. Momentum. Once you get started, your enthusiam builds. Once you have money "in the market", you'll track it, manage it, and in all probability, your desire to save will increase. If you've had difficulty saving in the past?START! Those monthly statements will be positive reminders to do even more. Yes, you should invest in tax-sheltered retirement plans first, and yes, there are other investment possibilities. And yes, there is some risk, because the market can go down. But to retire wealthy, pick a great, long-term growth fund, invest regularly, and let the system work for you! The key, as always is: GET STARTED!
Here's to your success!
© Copyright 2003 by Philip E. Humbert. All Rights Reserved. This article may be copied and used in your own newsletter or on your website as long as you include the following information: "Written by Dr. Philip E. Humbert, writer, speaker and success coach. Dr. Humbert has over 300 free articles, tools and resources for your success, including a great newsletter! It's all on his website at: http://www.philiphumbert.com
More Resources
Unable to open RSS Feed $XMLfilename with error HTTP ERROR: 404, exitingMore Stocks & Mutual Funds Information:
Related Articles
Pathways
During our travel down life's path we come to many places where the trail divides and we must make a decision. Some involve psychological (emotional) choices - marriage, divorce, leaving home, career changes, etc.
Some Good News for A Change
Before we get into all the good news out there, let us first take a look at what the term "news" really means. By definition, the term "news" means the exception to the norm.
The 401(K): How The Insider Has Stolen Your Retirement!
Mutual funds were moderately successful in creating a presence in the stock market until the advent of the investment retirement account and in particular the 401(k). Corporate insiders persuaded the federal government to allow for the 401(k) in lieu of offering employees the traditional pension.
Red, Green, Yellow - or - Stop, Go, Go Very Fast: Which Describes Your Online Trading?
Ever notice how behavior in one area of life can apply to behavior in other areas of life? For example, I've noticed a number of things while driving that apply to online trading. One of them is regarding how people behave toward traffic signals.
Online Investing & Stock & Share Trading: 4 Reasons Why Most Online Investors & Traders Go Broke
Are you attracted to the idea of being in control of your financial future, but confused about how to start investing in the stock or share market, while avoiding costly mistakes?Or maybe you're disappointed with your performance so far?Does it sometimes feel like every time you take the plunge and buy into the market, the price goes down?That's understandable..
Different Ways of Buying Stocks
Let's say you are interested in this one company. You read its annual report, like what you see and your calculation indicates that the stock is trading way below its fair value.
Momentum
One of the basic laws of physics states that a body in motion will continue in motion in the direction it is going until interrupted by another force.That basic physics law also applies to stocks and mutual funds.
Mousetrap
The spring-loaded rat catcher is the ultimate low-tech device invented more than 100 years ago and remains the best demouser in the world. It is so simple anyone can master it and best of all you can keep on using it year in and year out.
What Can Model Airplanes Teach You About Trading?
I was devastated!I just couldn't believe it. I was 10 years old and my dreams were shattered.
Dispelling Illusions of the Stock Market
How can you dispel an illusion unless you look directly at it? The magician distracts the eye with one hand while he does his manipulation with the other. You are looking in the wrong place and not seeing what is actually happening.
Two for the Money
Look back over the years and try to remember how many different stocks and mutual funds you have owned. Suppose you had owned only 2 different equities during that entire time.
365/7/24
What does it take to be a stock trader? It takes a total mental commitment to the task. It becomes a complete way of life.
Long Term Financial Vehicles
Investing in long-term financial vehicles give you the most gains but it also puts your funds at greater risk. There is much truth to the saying, "there is no gain if there is no risk".
Why Technical Indicators
The fight continues to rage among traders who use technical indicators and those who prefer fundamental information to establish new positions and to exit current positions.The fundamentalist believe in knowing all the facts about a company such as price earnings ratios, sales growth, product margins, management capabilities, cost of production, cash flow, etc.
Stock Trading Secrets?
How often have you come across an advertisement or e-mail proclaiming to "teach" you the stock trading secrets that Wall Street Insiders don't want you to know? Usually included in the descriptions of these trading products are claims such as "Make 10K monthly in minutes per day", or "Learn the secrets of Professional Stock Brokers", etc. etc.
Trading Tips No 8: Picking the Best Stock Market Price
Carefully thinking through your goal as a trader is of prime importance, when picking the best stock market price. It is very difficult if not impossible to meet a goal that is ill defined.
Precision Money Management
This article describes the model of a natural relationship between trading system performance, trade position size, stop loss settings and profit goals. The model consists of algebraic equations that specify the trade size and stop loss settings needed to meet profit goals over a specified time period for any consistently used trading system for which historical performance data is available.
The Seven Mistakes All Novice Traders Make and How to Correct Them
We learnt the following the hard way! If any of these things applies to you, don't worry - there is an easy solution!MISTAKE ONELack of Knowledge and No PlanIt amazes us that some people expect to trade the stock market successfully without any effort. Yet if they want to take up golf, for example, they will happily take some lessons or at least read a book before heading out onto the course.
On Line Stock Trading: Small Cap & Micro Stocks Go Up and Down - How Can You Profit?
Success in small cap & micro cap stock trading like with any other business in life comes from being able to see the big picture and from paying attention to the small details.Let's say for example that you are a business owner and you have a jewelry store on a given street just like the guy in the other corner does, but still the other guy is making 5 times more profits than you are only because he's doing something different.
Inverted Interest Rates
Inverted interest rates? What's that? Who cares? Even if you don't understand what Mr. Greenspan is saying (and almost nobody does) it is important to you because it could mean you might lose you job next year or have to cut back on some of the things you want to acquire.