The Retirement Corporation of America

Why You Should Own Mutual Funds

IN CASE YOU'RE not convinced already by the information in the preceding pages, here is our list of The One Dozen Sure-Fire Reasons Why You Should Consider Mutual Funds:

1. Diversification. Buy one stock or bond and the risk of loss is high. Diversify your money over many stocks or bonds and the risk of all going bad is low. The more you diversify, the less risk your money is exposed to. Mutual funds invest in many stocks or bonds—making them the easiest way to get the diversification you need.
2. Access to other markets. Would you know which corporate bond to buy or how to buy a stock traded in Korea? Mutual funds open the door to investments and markets you couldn't or wouldn't tackle on your own.
3. Professional management. Try rewiring your house and you may get a "shocking" example of what can happen when amateurs try things beyond their ability. Mutual funds are managed by investment professionals. A professional fund manager is likely to do better than you could do on your own.
4. Low cost. Most mutual funds let you start with $3,000 or less—many for $1,000 or less. And you can make smaller purchases after that. Even a small nest egg will let you diversify over three or four different funds.
5. Being able to pick the risk level that suits you. You will find funds offering every conceivable degree of risk, from very safe to not safe at all. The choice is up to you.
6. Endless variety. With more than 8,000 funds to choose from, you are certain to find one or more funds that exactly suit your needs.
7. Easy-to-find information. There's more readily available information about mutual funds than you could read in a lifetime. Many newspapers report fund performance daily. Financial publications compare the performance of thousands of funds every quarter. And the Internet features dozens, if not hundreds, of mutual fund sites.
8. Investor protection. Mutual funds aren't insured as bank accounts are. They are regulated by the Securities and Exchange Commission (SEC). The SEC requires funds to meet operating standards and to tell you everything—good and bad—about each fund that you need to know.
9. You know what you are buying. You'll get a fund "prospectus" before you buy, telling you the fund's objectives, who the managers are, how the fund has performed, how much you'll pay in expenses, and lots more.
10. You can buy shares without being rich. Most funds will let you automatically deposit as little as $50 or $100 of every paycheck to buy more shares. That makes it very easy to spend less and invest more.
11. They're the easiest way to build wealth. Mutual funds don't give you guaranteed returns. But, over time, you can accumulate both income and capital gains. The more you accumulate, the faster your net worth grows.
12. They're easy to buy and sell. You can buy "load" funds from a financial planner or stockbroker by paying a commission or load. You can buy "no-load" funds by from a fund company without paying a commission. You'll find ads for no-load funds everywhere, and you can purchase the funds by calling the toll-free numbers. And the mutual fund company you bought the shares from must buy them back from you. An increasing number of fund companies now let you buy and sell at their Internet sites.