Mutual Funds Can Be Your Key to Investing

Many people are looking for the key to successful investing of their hard-earned dollars. Most folks will look to the best percentage return on a given report, over any given timeframe, and fully expect to receive or beat that return for themselves. This assumption can bring on overwhelming disappointment and presents a bad picture of investing for many people.

Investors must look at three factors in order to be successful and to take appropriate risk.

Experience with Investing & Time Commitment

First, we must understand our experience with investing and determine our time commitment that will allow us to monitor our investments. Most people are not experienced with investing nor have the ability to review financial statements of companies to determine the best investment alternatives. The average investor has a full-time job that requires them to focus more on that task and less time to manage and monitor investments. Without this level of expertise, an investor could make grave errors with investing in companies, resulting in total loss of investment. Finding the expertise of an advisor or manager will be critical to successful investing and will allow you to keep your job.

Level of Risk Tolerance

Another key factor is finding your level of risk tolerance. Many want to see and receive the headline returns that are reported on business news channels or newspapers. Also, we all hear about that one special investment tip that will assure you of easy riches. Acting on one tip can cause you to take undue risk and potentially have imbalanced concentration. Achieving a high return consistently requires a higher level of risk taking. If you would accept a very favorable return of a higher risk investment, would you also be able to accept a very unfavorable return over a specific time? In most cases you will have to tolerate the low returns of investing in order to obtain the high returns. Most of us are in need of a secure and consistent level of investing. Preserving our investment and obtaining a fair return should be our goal. Taking on undue risk is not only undesirable but unnecessary in most cases.


Finally, in order to prevent undue risk or concentration, investors must focus on diversification. Diversification in the investment world means that we should spread our investments across several investment alternatives to avoid undue risk. Diversification might include investing a portion of your money into large/medium/small companies as well as into companies located in the United States and abroad. Consideration will also be required in order to invest in several different industries, such as technology, healthcare, financial, energy and real estate, to name a few. Again, most investors do not have the expertise to understand all the various industries that are available for investing.

As you can see, investing can be complicated if trying to tackle it by yourself. Investors must have the expertise, understand their risk tolerance and be able to achieve proper diversification to be successful. One way to get started is to take a look at mutual funds as a vehicle to invest. With mutual funds, you will find the expertise needed to manage your investments. Mutual fund managers do this for a living and are focused on keeping an eye on the market; they will be able to adjust much more quickly than an individual investor. A mutual fund manager and/or an investment advisor can help you determine what exactly your risk tolerance is and give you a portfolio that will allow you to preserve your investment (not to mention, more restful sleep at night). Mutual funds allow for ease of achieving proper diversification of investment. Investing across the various sectors and asset classes will allow you to participate in the upswings of the market but hopefully protect you on the downside of weak performance.

Ask an investment advisor about mutual funds. You might just find your key to investment success.