Mutual funds are more like buying a house than building one.
Ever wanted to build a house from scratch? Yeah, me either. Building a house requires time and energy to learn all the aspects of building the house. Excavation, concrete work, framing, HVAC, plumbing, electrical, painting, finish work, flooring, and even more I don’t want to think about. In his book, "Retire Before Mom and Dad", Rob Berger shares this analogy of building a house versus buying it in comparison to learning the stock market.
Really learning the stock market is like building a house; there is a lot to know. A very small percentage of people build their own houses, and similarly, a small number of people learn what they need to know or have the time and energy to build their own individualized investment portfolio.
Therefore, most great financial gurus like and leverage the power of mutual funds. Mutual funds allow you to buy hundreds or thousands of shares of stocks or bonds with far less effort, transaction fees, and stress.
Now, some people can still get deer in the headlights on what mutual funds to select. Isn’t that like buying a house? You still do your homework, maybe invest in a realtor, and shop around for the right fit for you.
I advise you to do the same thing. You have actively managed funds and index funds. You have stock funds and bond funds, domestic and international funds. Even the simplicity of investing in mutual funds can take you a small amount of time in selecting them. However, like a house, once you buy them, you get to enjoy them with just a little bit of maintenance once or twice a year.
Mutual funds are a simple and very smart way to invest. I highly recommend them. Like when buying a house, though, you need to educate yourself enough to know that you are making a wise decision.
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