5: Using Mutual Funds and ETFs to Achieve Your Financial Goals

Nearly 100 million individual investors own mutual fund shares, either directly or indirectly through their retirement plan account. Over half of the Generation Xers (born between 1965 and 1980) and nearly 40% of the adult Millennials (born between 1981 and 2004) own mutual funds. Why? The answer is simple: mutual funds are the best way for a novice investor to start investing. Through mutual funds, you can invest in the stock market or bond market or both, even with a small initial investment stake. You can easily diversify that small initial investment and subsequent contributions to reduce risk. This level of diversification is impossible when buying individual stocks. If you choose a fund or funds wisely, you may never have to pick another fund again. So, if you want to join those savvy investors and use the wealth-building power of the stock and bond markets but don’t want to spend your time following the economic prospects of dozens of companies, then mutual funds are for you.