But you have to leave it alone, for a long, long, long time. Frankly, I find this very liberating. I've got better things to do with my time than monkey with my money every few days, and I hope you do, too. There's a list of them in our article, on p. 108 of the Sept. issue of Money. Unfortunately, this table isn't available at our website.
Mutual funds are nothing but buckets full of stocks.
And when stocks are doing badly, a bucket full of them will do badly. However, if your idea of being a stock investor is owning two or three stocks, instead of a couple dozen, then yes, mutual funds are safer. Diversification is a powerful weapon against the risk of a market decline, and a diversified fund should, on average, outperform many individual stocks in a falling market. Also, federal law restricts the percentage of its assets a fund can put into any given stock, as well as the percentage of a company's total outstanding shares a fund can own. Furthermore, it's hard to buy large amounts of little stocks without signaling to Wall Street's sharks that you are an eager buyer.