The benefits of
mutual funds
Saving for the future is good. Investing for it is even better.
Playing it safe could actually cost you
If you are looking to avoid investment risk, you may think savings accounts,
CDs, or money market securities are the best way to put money away for the
future. They are insured, safe, liquid, and have a fixed rate of return, making
them seem like the ideal choice.
But savings accounts and “low-risk” investments
may actually run the risk of lagging behind the
rate of inflation. That could take a significant bite
out of the value of your investment over time.
The relationship between risk and reward
In the investment world, risk and reward are
inextricably linked. When you take on more
risk, you increase
potential return over
the long term.
Conversely, if you
want to lower the
risk, your potential
reward is also lower. If your goals are long
term, you should
consider investing in
securities that have a
history of outpacing
inflation, such as
stocks and bonds.
While these securities involve greater risks and are more volatile over
the short term, long-term
rewards may
get you closer to
your goals.
For long-term goals, mutual funds make sense
All investments have some kind of risk. The
challenge is to manage that risk to best suit
your needs. Although not insured, mutual funds are an easy way to
invest your money in stocks and bonds and
manage risk at the same time.
Mutual funds are pools of money invested by individuals and organizations
to pursue the objectives stated in the funds’ prospectus. Every dollar in
a mutual fund receives equal treatment, whether it belongs to a small investor
or a big corporation.
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