Wednesday, December 12, 2012

Are Stock Mutual Funds Reliable?

Are retirement funds based on stocks really reliable? Because the stock market fluctuates so much, many people have been leery of the investing in stocks. Anyone who began investing in the year 2000 would have seen their investments go down in value soon after, and not recover for a couple of years.

And you are probably aware of the "crash" of 2008, when anyone with anything in stocks, from individual stocks to mutual funds, lost about half their money.

But a year and a half later, the stock market recovered. Those who had invested in good mutual funds saw their original value come back. If they had continued to invest during the downturn, they would have ended up with even more. Why? When the stock market is down, you can buy more
shares for a lower price. Then when the market recovers, you are holding all these extra shares that suddenly skyrocket in value.

The history of the stock market bears out that overall, investing in mutual funds will help you build a large nest egg over a long period of time. The trick is to invest in stock mutual funds that are at least ten years old, and have averaged between a ten and twelve percent gain annually.

Think they would be hard to find? Here are a few such funds available from T. Rowe Price, an old and reputable investing company.

* The return of the Mid-Cap Value domestic fund has averaged 10.54%
since 1996.
* The Real Estate domestic fund has averaged 11.03% since 1997.
* The Small Cap Value domestic fund has averaged 10.90% since 1988.
* The Latin America fund has averaged - get ready - 18.43% since 1993.

And you can easily find many more funds that average an eight or nine percent return. You can even find bond funds - which tend to be less volatile than stock funds - that will bring about a six percent return.

Of course, it is crucial not to begin withdrawing from your retirement funds during a bearish economy. But if you do your homework and have patience, investing in stock mutual funds will likely provide you with a very comfortable retirement.

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