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When you invest in the stock market, there is always some level of risk. The market goes up and down, and you may sometimes find your investments going from in the green to red and back again.
But investing in the stock market has more upsides than not. Not investing is detrimental to your long-term financial journey. Mutual funds are a great way to get started and are safe to invest in if you follow some key points.
Mutual funds are investments that let you buy multiple stocks or bonds at once—for a flat dollar amount and a relatively low fee. They come in two flavors: active and passive funds. Passive funds track an index, like the S&P 500, and they’re also known as index funds. Active funds means a fund manager is behind the computer buying and selling securities and building a portfolio that’s meant to beat the market.
The great thing about mutual funds is that when you invest in them, your money is spread out among hundreds, if not thousands, of different companies, instead of a select few. This is known as diversification, and can help protect your investment should one company take a turn for the worst.
Of course, all investments carry risk and you can lose money in a mutual fund. But it’s not likely, especially if you’re diversified. There are some other risks to consider, too. Before investing, it’s always important to do your research. Read on to learn why mutual funds are safe to invest in and some of the advantages and disadvantages of mutual funds for investors.
Are Mutual Funds Risky?
Just like with any type of investment, mutual funds carry a certain level of risk. As long as you are diversified in your investments, know what you’re invested in, and have a long-term perspective, you carry a good chance of making money.
Timing is important. Think of investing as a long-term play. Try to keep your investments in the stock market as long as you can so you can let compound interest do the work for you. The stock market is always changing, and if you don’t need your funds immediately, there’s a good chance the stock market will come back up and you’ll recoup your losses (and then some). That’s why mutual fund investing is best for money …….