Why Are Mutual Funds The Most Common Type Of Investment?

Why are mutual funds the most common type of investment? Mutual funds are very popular because a manager or a board of persons who are all experienced in the ins and outs of keeping a strong portfolio manages them.

"Mutual Funds are held by 90 million American households...and are clearly a great investment choice to reach lifetime goals," said Michelle Smith, the managing director of the Mutual Fund Education Alliance. Studies show that almost one out of two households is invested in mutual funds. At a conservative guess, that is near six trillion dollars. These funds are pools of money that anyone contribute to and in turn, gain access to a variety of securities and expert guidance. Mutual funds are made up of stocks, bonds and numerous variations of other securities. Some funds have a couple of thousand of companies that they use for investments.

"Their popularity is no surprise as mutual funds provide a great way for anyone to participate in the financial markets. Funds provide diversification, they are readily available at relatively low or very low cost, it doesn't take a huge amount to get started, there are thousands of funds to choose from to meet any investment goal...there are tremendous benefits. Many people are invested in mutual funds through their 401k or retirement plan where they work. Funds provide the opportunity for long-term investment growth for anyone," said Michelle Smith.

Mutual funds are very cost effective, which makes them very attractive to investors. Many stocks have a minimum amount of money that you must spend to buy their shares. Since it would be a very risky decision to buy just one stock, you need more. To diversify your own portfolio could take up to $100,000. A mutual fund however has a low buy-in, most of them between $1000 and $5000. Immediately you have just acquired shares of many companies with just one transaction. In some cases, such as no-load funds, you do not even pay sales charges.

Not everyone has the time or aptitude to become a financial wizard on the stock market. Mutual funds are very popular because a manager or a board of persons who are all experienced in the ins and outs of keeping a strong portfolio manages them. Purchase a mutual fund and you have just acquired experience and knowledge of the market. Working with an investment person yourself can get very expensive and you may not be sure to ask them to right questions to satisfy yourself.

Another reason mutual funds are popular is that as easy as it was to purchase, it is just as easy to sell them. Many mutual fund companies have websites that allow you to access your account information and even supply phone numbers of specialists who work for them to answer your questions. This level of convenience is hard to come by if you are on your own.

Many families of mutual funds have ones the compliment the whole life cycle. They have high-risk funds that aim for maximum capital appreciation, along with the risk. There is a gradual slowdown through the years for people. Mutual funds have objectives that work with persons in the middle of their life down to retirement years. The risks get lower and income potential and safety of capital increases.

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