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Advantages of Mutual Fund Investing for Seniors

Putting money in the stock market is often seen as something that’s exclusively for the young or maybe only the very wealthy. However, when you choose the right way to invest, it can have advantages at any age. For seniors, one of the best investing tools you can use is mutual funds.

What is a Mutual Fund?

Before getting into why a mutual fund might right for you, it will help to know what it is exactly. A mutual fund is “an investment program funded by shareholders that trades in diversified holdings and is professionally managed.”

What that boils down to is, it’s a way to buy a little bit of several different companies all at once. The stocks that go into a mutual fund are chosen and managed by a professional investor. This diversification leads to several advantages:

Stability: Since there can be hundreds or even thousands of stocks represented in a single mutual fund, the overall value of the fund is far more stable than a single stock.

Why it’s Good: This is especially good for seniors who would like to increase their money without putting it at too much risk.

Diversification: Even if you’ve never invested in the stock market there’s a good chance you’ve heard about the importance of diversifying. Diversifying is when investors buy a variety of stocks from different industries in order to balance out their portfolio. If one sector is down, another might be up so your total account has less chance of plummeting all at once. With a mutual fund, you don’t have to pick these individual stocks because they are already picked for you.

Why it’s Good: A mutual fund becomes like an instant portfolio. If you don’t have the time, patience or know-how to pick your own individual stocks, this will allow you to reap the benefits of diversification without spending hours researching.

Expert Management: Managers of mutual funds are not only knowledgeable, they also have access to investment tools that an individual doesn’t have. They also know how to use those tools to maximize the benefits.

Why it’s Good: This lets you have a lot of the advantages of a personal finance manager without having to pay nearly as high of a price. However, mutual funds do carry a fee so that’s important to be aware of.

Disadvantages of Mutual Funds

It’s worth noting that mutual funds might not be for everyone. If you’re a more seasoned investor who is used to having hands on decision-making abilities, a mutual fund might not be for you. This is because, it’s unlikely you will have direct access to the manager of the fund who will be calling the shots.

Also, capitalizing on a sudden shift in the market is difficult since the NAV (net asset value) is decided at the end of the day for a mutual fund. Depending on when you try to trade, there is a good chance you will be trading at the following day’s end price. Basically, if you’re looking to buy and sell on a whim to make a lot instantly, a mutual fund isn’t going to allow for that.

However, if you want your money in a stable environment where you will have the opportunity to earn more than in a savings account and where you don’t have to interact with it too much, then a mutual fund can be a great option.

Another way to make the most of your money in retirement is to enter a Life Plan Community like the Cedars of Chapel Hill. At Cedars, we help you make the most of your retirement and your money by providing a wide range of dining, shopping, entertainment and healthcare options all within our community. Find out more about life at the Cedars here.