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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!
"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"
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