With so many options for where to put your money, it can be a real challenge at times to make the correct decision. While there’s no one right place for all your money to be, there are a lot of arguments to be made for investing a good chunk of your money into a mutual fund.
For one thing, mutual funds guarantee diversity, which is an especially important feature of any investment portfolio. As mutual funds spread your money across a number of different stocks, you stand far less a chance of losing much of it off of any one development. Aside from the entire market crashing, your mutual fund should be able to resist a lot of negative events.
Mutual funds are also a great way to take advantage of the economics of scale. You know how a lot of stores will sell you mass quantities of products at a smaller per-unit-price than if you bought fewer? The same thing happens with mutual funds. Investors get more shares in more stocks than they otherwise would if they tried buying them on their own.
It’s also easier to pursue dollar-cost averaging with mutual funds too. When most savvy investors buy stocks, they do so slowly but surely, over time. This practice, called dollar-cost averaging, usually means the average amount of each share decreases. Mutual funds are such a diverse marker that it’s easy to find affordable ones where you can invest more and more month after month. Many very respectable funds only ask for a $100 minimum investment.
As long as you do your research, mutual funds are generally as cheap as if not cheaper than using a broker. This makes it very easy to get in and out, meaning your investment is never far from being liquid.
While there is no end to the vehicles you can use to grow your money, mutual funds are definitely deserving of your consideration for all the above reasons.
Source:
http://www.investopedia.com/articles/basics/03/040403.asp
