Retirement is generally considered a long-term investment objective. But there are mutual fund types, such as money market funds or bond funds, that are suitable for most short-term needs. Investors may also combine types of funds to tailor more specific investment objectives. Mutual Funds Are Versatile Enough to be Used By All Types of Investors. All of the advantages of mutual funds mentioned in this article combine into one advantage of flexibility. They’re simple enough to be understood and used by beginners but versatile enough to be used by professional money managers, who often use them to build portfolios for clients.
Some of the key benefits of mutual funds include simplicity, cost, diversification, and professional management. These and other benefits make mutual funds the first and best choice of investment for the do-it-yourself investors, as well as professional money managers. If you are a beginner and want to know why mutual funds are a good fit for your investment needs, or if you are an advanced investor and need a reminder of why mutual funds are best-suited for your financial goals and lifestyle, here are some of the many benefits you need to know. Here are 8 of the top benefits of mutual funds:
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Bottom Line on Buying Mutual Funds
A beginning investor may buy their first mutual fund to start saving for retirement, while a large investment firm might use the same mutual fund in a portfolio of funds for a major client, such as a wealthy trust client or an endowment fund used by a major university or non-profit organization. There’s no doubt that mutual funds are here to stay for many more years and decades to come. With trillions of dollars invested in mutual funds in the U.S. alone, and popularity increasing in emerging markets like India, there’s no reason to expect this versatile investment type will do anything but gain in popularity in the future.
Joint Brokerage Account: This works the same as an individual brokerage account, except there are two account holders, such as spouses.Individual Retirement Account: Also called an IRA, qualifying individuals can make contributions that are not taxable. Growth is tax-deferred, which means that account holders don’t pay taxes until withdrawals are made. Roth IRA: This is an individual retirement account that is funded with after-tax dollars, which means contributions are not tax-deductible, as with the traditional IRA. However, growth is tax-deferred and qualified distributions (withdrawals) are tax-free. For more on the Roth and the traditional IRA, see this article on how IRAs work.