Mutual funds can save you research time in investing for retirement
Investing in mutual funds can be an efficient way to grow funds for retirement. Like investing in stocks, there is risk associated with mutual funds, but there are ways to minimize risk and hopefully grow your investment faster than inflation and more conservative savings vehicles like CDs and savings accounts.
The general rule with investing is that the younger you are, the more exposure you should have in stock markets. I say ‘markets’, because there are several stock markets of importance these days, not just the U.S. ones.
There are many versions of this rule, namely the 100-, 110- and 120- age rule. The 100- age rule says that you should subtract your age from 100 and invest that amount in stocks and the balance in bonds or other less-risky vehicles.
Therefore, if you are 30 years old, you should have 70% in stocks and 30% in bonds. By the time you get to 50 years old, it should be 50:50 mix, and when you are are 70, you should have 70% in bonds and 30% in stocks.
The 120-age rule would be different – (120-30) or 90% in stocks at age 30 and 50% at age 70. The higher 110- and 120- rules are likely touted by stockbrokers who would like consumers to be more fully invested in stocks even up to retirement age.
My personal viewpoint is that no-one should be 50% in stocks at retirement time, unless you have an unnatural penchant for risk. A swooning stock could destroy your ability to even retire, as it did to millions during the Great Recession of 2008.
Why Mutual Funds?
You could aks the question: why buy mutual funds instead of just buying stocks directly?
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