Even if you are a sophisticated investor, this activity requires a significant amount of time and energy. Professional management takes this burden away. Mutual funds provide instant diversification Looking ahead, your goal is to increase the size of the nest egg that you'll rely on during your retirement. If you're like most people, you don't want to risk all of your retirement money on one investment. If that investment fails, your retirement fund could be jeopardized.
Diversification is one way to minimize risk without sacrificing the potential to make money.
If your retirement dollars are spread out among a number of different investments, you're better protected because it's unlikely that all of your investments will suffer losses at the same time. Since mutual funds invest in many different securities, there is instant diversification. The average person would find it close to impossible to create a collection of individual investments as diversified as the typical mutual fund. Choosing among funds There are many funds from which to choose. The amount of risk and potential reward associated with each depends on its investment objectives and the securities it holds.