Many people are tired of the poor interest rate of savings accounts. These days it barely outruns inflation. CDs and treasury bills likewise do not offer strong investment returns. The financial instrument that really offers the best long-term gains is the stock market. But don’t worry – you don’t have to be a stock expert to get exposure. There is an excellent financial product that millions have bought and you can do as well – mutual funds.
Mutual funds are excellent because of their convenience. You do not have to individually own any stocks. Instead, money is pooled with other investors in the fund. The capital is then managed by professional managers and analysts. This makes them a very low maintenance investment. You do not have to log into your stock brokerage account every few days to see how your stocks are doing. It is a “set and forget” investment.
Another benefit of owning a mutual fund is the broad exposure you will get. If you are just starting out often you will only have enough money to buy one stock. This greatly increases your risk exposure. If the one stock you buy is Exxon Mobil, your savings will largely depend on the price of oil. But if you buy a mutual fund, you will be getting a small slice of usually hundreds of stocks. Your portfolio will still be affected by the price of oil but it will no longer be a determining row.
Mutual funds offer excellent benefits to the typical retail investor. This is because of their convenience and the diversity they offer. They should be seriously considered by anyone trying to invest in the stock market.