You can make money grow faster through mutual funds compared to other kinds of investments. The key is to select the mutual funds that fit your goals, risk tolerance and time horizon. The process isn't difficult, but it does requires attention to detail. Follow these steps to make money grow faster through mutual funds.
Take a look at where your money is now. If it is sitting in a bank checking, savings or money market account, then it is probably only earning a tiny bit of interest. If it is in certificates of deposit or bonds, then it may be making a tiny bit more, but your money may also be tied up for a set period of time. Mutual funds can make your money grow faster than these kinds of investments.
Decide how much you want to invest. Understand that you are putting this money at greater risk and hoping that it will grow faster through mutual funds. Only invest money that you don't need for several years.
Calculate your time horizon. Will you need this money in 3 years or 30? Is it for retirement or an upcoming purchase? The longer the time horizon, the more aggressive your investment can be.
Understand how mutual funds work. Mutual fund companies invest in a variety of stocks, bonds, cash and other products, then sell shares to investors. Different mutual funds have different proportions of each. Some invest entirely in blue chip company stocks, some take a balanced approach, and some focus on sectors like technology, small companies or foreign stocks. Chances are there is a mutual fund that fits your investing profile.
Find mutual funds that suit your needs. The most popular mutual fund companies are no-load. That means they don't charge a fee to buy or sell their products. No-load mutual fund companies include Fidelity, Vanguard and T. Rowe Price. All of them sell a wide variety of mutual funds and will advise you on which may be best for you. They fully disclose which mutual funds are higher and lower risk investments. You can view all their products online at their websites (see Resources below).
Open an account with the mutual fund company of your choice. You can do this online or through the mail. Select which mutual funds you want to invest in and send them a check. Sit back and watch your money perform.
- All investments involve risk. This is especially true of mutual funds that go up and down with the stock market. Carefully consider all risks, fees and consequences before investing any of your money.
- Stocks tend to outperform bonds and cash investments over time. Allow your stock-laden mutual funds to do this by leaving them alone. Resist the temptation to make rash decisions based on short-term swings. Mutual stock investing is measured in years, not months. Find a mutual fund that fits your time horizon and try to stick with it.