Investing well in today’s consistently volatile economic market means learning how to manage risk. Historically, one of the best ways for the average investor to manage risk easily is to invest in mutual funds.
Mutual funds provide instant diversification for those investors looking for a long-term strategy. They provide a higher rate of return, historically, than fixed investments such as money market funds. They also provide a lower exposure to the whims of the market than similarly invested individual stock funds. All in all, many financial planners and experts recommend having some top mutual funds as a substantial portion of your investment funds, increasing the overall balance of mutual funds as you get closer and closer to retirement.
The best mutual funds are the mutual funds that can withstand a great deal of scrutiny. This is essential because much information about investments is available to the general public that was not available before the rise of the Internet. In the modern era of investing, any investor that goes into a mutual fund without researching the top investments and the management involved is doing themselves a great disservice.
However, this increase in information is contributing to the increased rate of mutual fund returns. Managers know that they have to be on their best behavior and maintain the validity of their funds no matter what. Contrary to popular belief, many of the mutual fund managers were not the ones that perpetrated the unscrupulous actions that caused people to lose money during the Great Recession. Most mutual fund managers were actually quite conservative with the money in their funds, and many of them actually were able to help their clients weather the storm of the Great Recession.
For those investors who would ask the question, “What are mutual funds?” the easiest way to answer it would be to compare mutual funds to other types of investments. In reality, it does not matter that a mutual fund is denotated as a basket of similarly themed investments that is overseen by a management team. The only thing that matters is the return that an investment gets for a client over the term of that investment.
Mutual funds have consistently provided the savvy investor with a consistent rate of return over the past 50 years, even taking recessions into account. These returns have consistently outpaced inflation and are seen as being quite good investments for those looking for long-term retirement packages.