*According to the U.S. Securities Exchange Commission, 1 in 3 Americans invest in mutual funds to build wealth. You can be one of them. Additionally, investing in mutual funds may be cheaper than the average mobile phone bill.
Mutual funds are terrific investments that allow you to build wealth over time. If you invest $50 per month, for ten years, at 8 percent interest you would earn $9,387.29. After twenty years its $29,653.75 and thirty years its $73,407.52. Imagine if you invest more.
You can purchase mutual funds shares individually, on-line, or with a broker. Shares represent partial ownership in every company your fund invests in. Your money gets pooled with other investors’ money to purchase stocks, bonds and other assets. The company earns money from those assets for profit. You earn money by selling shares for more than you purchased them for. Some funds offer quarterly payouts called dividends.
Mutual funds offer many advantages, including diversification. Mellody Hobson, president of Ariel Investments, agrees.
“If one stock goes up one day and another stock goes down, they balance each other out,” Hobson points out. “You don’t have all of your eggs in one basket. They are spread across a portfolio of companies.”
Another advantage is professional financial guidance.
“With mutual funds you’re not sitting at home trying to figure which stock to buy, betting your whole future on something,” she says. “You have people who are trained professionals doing that for you.”
Many investment companies, including Ariel and others waive the initial deposit fees if customers sign-up for automatic $50 monthly investments. Hobson says automatic investing allows people to
“ build wealth effectively.”
Like many investments there are risks connected to the market’s ups-and-downs. These fluctuations don’t scare the Chicago-native. She says investing in good companies during a financial downturn can “produce long-term profits.” (Long term investing means 5 years or more.) It’s like buying your favorite designer outfit at discount. The price is lower but the value remains.
You can monitor your shares’ value by typing the fund’s ticker symbol on-line with services like Yahoo! Finance or looking it up in a newspaper’s business section. Most companies allow you to withdraw funds via check or wire transfer to a connected bank account.