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?
So let's say you want to sit on this money for 5 years. You can take your money and put it in a growth stock mutual funds. These may include international, aggressive growth, stable, etc. There are several different kinds. You just have to make sure that what you are investing in are stock mutual funds. Now, if you can't leave your money alone for a period of 5 years, then you may need to consider a CD or a bond.
But if you do plan on leaving it alone and you plan on investing in growth stock mutual funds, you will find that the risk to return ratio is quite amazing. You could make more in individual stocks, but you have to determine if the risk is worth it.
But with stock mutual funds, the risk to return ratio is what you want to focus on. In the end, you may net more money due to the fact that the risk is lower.
Interest rates in this lackluster economy of ours will tell the tale. Our Federal Reserve has made it clear that they INTEND to keep rates low until the economy and unemployment rate improve. What if the independent rating agencies (Standard & Poor's, Moody's, and Fitch) lower their credit rating for USA debt securities again and continue to warn investors? What if China and/or Japan (who both own over $1 trillion of our debt securities) announce that they have lost faith in our financial system, and start selling our debt in the open market? Interest rates would soar, sending bond prices and funds into a tailspin. Score one point for stock funds vs. bond funds as the best funds for 2013, 2014.
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!
So let's say you want to sit on this money for 5 years. You can take your money and put it in a growth stock mutual funds. These may include international, aggressive growth, stable, etc. There are several different kinds. You just have to make sure that what you are investing in are stock mutual funds. Now, if you can't leave your money alone for a period of 5 years, then you may need to consider a CD or a bond.
But if you do plan on leaving it alone and you plan on investing in growth stock mutual funds, you will find that the risk to return ratio is quite amazing. You could make more in individual stocks, but you have to determine if the risk is worth it.
But with stock mutual funds, the risk to return ratio is what you want to focus on. In the end, you may net more money due to the fact that the risk is lower.
Interest rates in this lackluster economy of ours will tell the tale. Our Federal Reserve has made it clear that they INTEND to keep rates low until the economy and unemployment rate improve. What if the independent rating agencies (Standard & Poor's, Moody's, and Fitch) lower their credit rating for USA debt securities again and continue to warn investors? What if China and/or Japan (who both own over $1 trillion of our debt securities) announce that they have lost faith in our financial system, and start selling our debt in the open market? Interest rates would soar, sending bond prices and funds into a tailspin. Score one point for stock funds vs. bond funds as the best funds for 2013, 2014.
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!
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Frank Miller has a Debt Consolidation Blog & Finance, these are some of the articles: Investors Choose To Buy Copper Bullion You have full permission to reprint this article provided this box is kept unchanged.
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