Once you become more comfortable with a frugal lifestyle and handling your own finances, it’s time to think about investing and the diversification of your savings. There are obviously many ways to increase your savings, whether it’s putting them in stocks, high yield funds, or even mutual funds. Lately, I’ve been wondering: Are mutual funds worth it?
Most are familiar with the diversifying your portfolio through stocks. There are lots of companies, websites, and financial experts that can help you figure out what stocks are best for you. But for a person like me who would like to increase their savings with a lower risk but higher diversification, a great mutual fund is the way to go. You’re able to invest your money in many shares without having to find each one. Because your portfolio is managed well, you have a chance of having a better distribution of stocks and bonds in the portfolio. Basically, the experts work hard to make sure the group of stocks you invested in will make you money in the long term. Mutual funds also provide a capital gain for the investors with minimal risk. So, if your share is sold at a profit or gain within a mutual fund, you increase your savings. Easy Peasy.
Now the only thing I see as a real issue with mutual funds is that there are quite a few hands taking care of your money. Thus, these many hands that work hard to keep your savings in the black also need to be paid. They are usually paid through fees. There could be up to 6 different fees that you’ll have to pay for the management of your mutual funds. While stocks are high risk, they don’t have nearly as many fees. So, there is an increased risk, but the payout will be greater in the back end since you don’t have to pay repeated fees. If you’re looking for a great investment with minimals risk AND fees, check out Exchange Traded Funds. The fees are fewer and lower, and in most cases, they can offer more diversification. Be sure to find a broker you trust, and ask for their opinion on stocks, bonds, mutual funds and Exchange Traded Funds.
Disclosure: This is a sponsored post for Standard Life. All opinions and financial research are my own.
