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The Top 10 Reasons to Invest in Mutual Funds
Everyone who follows
the financial news has heard of mutual funds and knows the stock market has
generally risen (with various
ups-and-downs) for over 200 years. In
fact, by most measures, the stock market has made more money for more people,
and done it more reliably, than any other investment over the past
If you want to accumulate substantial wealth, you must include stocks in
But, most people who
“invest” don’t study the market. They
don’t understand it, and they don’t have time to manage their portfolio
wisely. That’s where mutual funds
come in. I respect that other
people have other opinions, and certainly not all mutual funds are well managed
– you MUST choose wisely and use appropriate caution!
But, for most folks, a good, solid, boring mutual fund is the golden path
Here are my Top 10
reasons to us mutual funds:
Selection. You can
select from thousands of funds (you’ll find one to suit your needs) and you
can get information on them easily. Magazines
like “Money” are easy to find. Most credit unions have information, and your local library
is a goldmine – and there’s the Internet.
You Can Start
Small. Most mutual funds will
let you start with less than $1000, and if you set it up for automatic deposits,
some will let you start with only $50. I’ve
spent more than that in a restaurant! There is NO reason not to consider
deposit 10% of your income every month. Just
pay yourself first, then pay the mortgage, then pay everyone else.
Professional management. I
don’t always have time to research, select, and monitor individual stocks.
So, I pay a professional a small fee to do it for me.
A good fund manager will make you rich!
Compound interest. Depending
on what index you pick, the U.S. stock market has gone up an average of over 12%
per year for the past 10 years, and it’s been almost that high for the past 20
years. The market fluxuates, but
the beauty of this is, you don’t care! Over 10, 20, or 30 years, the system works every time!
details are complicated, but by investing every single month, whether the market
is up or down, you get a tremendous boost from the mathematics.
Your “average cost” will always be less than the “average price”
you paid! And that is money in your pocket!
broad-based growth fund typically invests in dozens of companies in different
industries, sometimes even in different countries around the world.
If one stock goes down, hopefully dozens of others will go up.
There is excellent protection and sound risk management built-in to these
you prefer, and if you do the research, there are funds that invest in only a
very small number of companies. If
you can accept the additional risk, you can invest in one particular industry,
or one country, or in companies of a certain size or that are environmentally
responsible. This specialization
offers the potential for even greater profits, but it can also bring greater
potential risk. Study before you invest!
Fund “Families”. Most
mutual funds are offered by management companies that sponsor several different
funds, with different objectives. They
make it easy to move your money between funds, so as your goals change, you can
adjust your investements with a quick phone call, or on the Internet.
Momentum. Once you
get started, your enthusiam builds. Once
you have money “in the market”, you’ll track it, manage it, and in all
probability, your desire to save will increase. If you’ve had difficulty saving in the past…START!
Those monthly statements will be positive reminders to do even more.
Heres to your success!
Phil, Mary, and the Staff at
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© Copyright 2003 by Philip E. Humbert. All Rights Reserved. This article may be copied and used in your own newsletter or on your website as long as you include the following information: "Written by Dr. Philip E. Humbert, writer, speaker and success coach. Dr. Humbert has over 300 free articles, tools and resources for your success, including a great newsletter! It's all on his website at: http://www.philiphumbert.com "