In the years leading up to 2013 and 2014... most investors bought into the concept that the best mutual funds, stock funds vs. bond funds, were bond funds. They were viewed as the best mutual funds because they had consistently performed well with less risk. The question now is: will they continue to outperform over the long term as the best investment in 2013, 2014, and beyond?
When you invest in mutual funds, you are able to diversify and reduce your risk of losing money. Do you think that those wealthy investors out there just put their money in a couple of stocks? No! Either they are investing in mutual funds or are buying large numbers of stocks. When you purchase mutual funds, you are hiring a professional manager at a relatively inexpensive price. It would be a little off the wall to think that you have more knowledge than a mutual fund manager! Most managers have been around the track a number of times and have the academic credentials to back up their knowledge.
Mutual fund companies have the advantage of capitalizing on economies of scale because they pool investors' monies together. Since these companies have large amounts of money to invest, they usually have personal contacts at many brokerage firms and often trade commission-free. Mutual funds are easy to take care of. The bookkeeper is much more challenged when there are hundreds of stocks to keep track of!
Since the beginning of the year 2000, stock funds vs. bond funds have paid much lower dividends, AND have experienced heavy losses in TWO severe bear (down) markets. Average investors have lost confidence in equities, and now many consider the stock market too risky. In deciding which are the best mutual funds and your best investment for 2013 and 2014 keep this in mind: both have significant risk going forward. On the other hand, only one of these investment options has the potential for high returns, while the other has limited prospects for gaining significantly in value - plus plenty of downside risk. If the interest rate trend turns around and rates rise significantly, fixed income debt securities WILL be losers and WILL be BIG LOSERS if interest rates go up big time. They can't be big winners if rates continue to fall... because interest rates are already ridiculously LOW and can't fall much further. Equities or the stock market is a more difficult call, but generally speaking when money leaves the debt securities market some of it flows to equities which tends to support stock prices. That's the advantage of stock funds vs. bond funds as the best mutual funds going forward. They have upside potential, while bond fund returns are limited.
So if you're wondering how to invest your money, this is a great way to go about that. So go ahead and invest and have a great time doing it. You might be quite pleased.
Generally speaking, mutual funds have a much lower risk than stocks. This is largely to diversification which was mentioned earlier. With stocks, there is always the worry that the company you are investing in will go belly up! With mutual funds, that is next to impossible. As you can see, there are many advantages in investing in mutual funds over stocks. It is not to be said that you should never invest in stocks, but if you are just getting your feet wet with investing it would be best to go with mutual funds!
When you invest in mutual funds, you are able to diversify and reduce your risk of losing money. Do you think that those wealthy investors out there just put their money in a couple of stocks? No! Either they are investing in mutual funds or are buying large numbers of stocks. When you purchase mutual funds, you are hiring a professional manager at a relatively inexpensive price. It would be a little off the wall to think that you have more knowledge than a mutual fund manager! Most managers have been around the track a number of times and have the academic credentials to back up their knowledge.
Mutual fund companies have the advantage of capitalizing on economies of scale because they pool investors' monies together. Since these companies have large amounts of money to invest, they usually have personal contacts at many brokerage firms and often trade commission-free. Mutual funds are easy to take care of. The bookkeeper is much more challenged when there are hundreds of stocks to keep track of!
Since the beginning of the year 2000, stock funds vs. bond funds have paid much lower dividends, AND have experienced heavy losses in TWO severe bear (down) markets. Average investors have lost confidence in equities, and now many consider the stock market too risky. In deciding which are the best mutual funds and your best investment for 2013 and 2014 keep this in mind: both have significant risk going forward. On the other hand, only one of these investment options has the potential for high returns, while the other has limited prospects for gaining significantly in value - plus plenty of downside risk. If the interest rate trend turns around and rates rise significantly, fixed income debt securities WILL be losers and WILL be BIG LOSERS if interest rates go up big time. They can't be big winners if rates continue to fall... because interest rates are already ridiculously LOW and can't fall much further. Equities or the stock market is a more difficult call, but generally speaking when money leaves the debt securities market some of it flows to equities which tends to support stock prices. That's the advantage of stock funds vs. bond funds as the best mutual funds going forward. They have upside potential, while bond fund returns are limited.
So if you're wondering how to invest your money, this is a great way to go about that. So go ahead and invest and have a great time doing it. You might be quite pleased.
Generally speaking, mutual funds have a much lower risk than stocks. This is largely to diversification which was mentioned earlier. With stocks, there is always the worry that the company you are investing in will go belly up! With mutual funds, that is next to impossible. As you can see, there are many advantages in investing in mutual funds over stocks. It is not to be said that you should never invest in stocks, but if you are just getting your feet wet with investing it would be best to go with mutual funds!
About the Author:
Frank Miller has a Debt Consolidation Blog & Finance, these are some of the articles: Things To Consider Before Using A 401K Calculator You have full permission to reprint this article provided this box is kept unchanged.
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