Diversification

Buying individual stocks is potentially lucrative, but it can be risky as well. When you buy an individual stock you always run the risk that the company will go out of business, or that the stock will fall sharply. When you invest in a stock mutual fund, you become part owner of many different stocks. Some mutual funds hold dozens or even hundreds of different stocks, and this can spread out your risk and reduce the volatility of your overall portfolio.

Long-Term Growth

Investing in mutual funds is an excellent way to build wealth for the long term, especially if you take a dollar cost averaging approach. When you dollar cost average into a mutual fund. you invest a set amount of money each month, regardless of the current level of the stock market. Over time, you automatically accumulate more shares of that mutual fund when the market is down and fewer when it is up. This buy low and sell high approach is key to long-term success for mutual fund investors.

Current Income

References

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