Tuesday, April 3, 2007

9 Great Reasons to Own Funds

Mutual funds are the best way to diversify, buy stock in small and large firms, and also get the knowledge of the fund manager for a price.


    1. Cash in on big returns: Over time, stocks of big companies have made about 10% per year, on average, and stocks of smaller companies, about 13% a year. Compare that with the sub-5% return from a bank account or even short-term Treasury bills, and funds that invest in stocks and bonds blow away the competition. …

    2. Hire top-notch help: When you invest in a mutual fund, you hire professionals. These pros don't dabble in stock picking on evenings and weekends; they do it full-time. …

    3. Diversify for cheap: Managing a big portfolio of individual stocks and bonds is expensive, and trading costs can quickly eat up your profits. By comparison, funds are cheap. …

    4. Spread your wealth: Dividing your money among different types of investments is called asset allocation. Studies have shown that investing in different types of assets is even more important to your wealth than the specific investments you own. …

    5. Start small: Don't have a lot of cash to start your nest egg? Several fund families, including Ariel Funds and T. Rowe Price, let you begin investing in their funds for only 50 bucks a month, if you contribute monthly. …

    6. Expand your horizons: With mutual funds, you can venture outside your realm of expertise to make money. …

    7. Ease yourself in: A technique known as "dollar-cost averaging" means that you invest small amounts periodically -- say, once a month or once a quarter -- instead of investing a lump sum. …

    8. Make a quick getaway: When you need your money, you can sell mutual fund shares for free any day the market is open. …

    9. Delegate your portfolio: Even a good fund portfolio needs to be tweaked from time to time. If you don't want to bother, target retirement funds will do the tweaking for you. …

Read complete article at Kiplinger.com: 9 Great Reasons to Own Funds

No comments:

Read these!