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Chapter 5. Investments > Mutual Funds

Mutual Funds

Particularly for people who do not have a great deal of money to invest, a mutual fund can provide many benefits. Perhaps paramount of the benefits of mutual fund investing is the built-in diversification. Mutual funds may contain anywhere from 30 to more than 100 stocks. To get that important investment diversification on your own, you would have to invest much more money than the cost of buying into a mutual fund. Diversification is important because it spreads out your risk. With all of your money in one basket (or stock), if that basket springs a leak (what a mixed metaphor) or that company has problems, you are in trouble.

Also, with a mutual fund you get professional management: a team of people who are experienced in stock purchases and who spend their entire time gathering investment information, analyzing it and making investment decisions.


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