That was the state of investing in the late 1990s. It ain't the late '90s anymore. It's a mean, ugly bear market out there, and to keep your head above water you really have to know what you're doing. Now more than ever you want the money you invest in stocks to be invested by people who know what they' re doing. Any moron like my freind can make money in a bull market, but it takes real skill to succeed when the bears prowling.
Mutual funds give investors inexpensive access to expert financial management.
That's not to say you can't buy the occasional individual stock if you want, but do so only with the most aggressive part of your investing money - and that part should be pretty small. If you think you're going to need the money you're thinking about investing any time within the next two years, you should not be invested in an equity mutual fund. Think of investing like the first round of the baseball playoffs. Unlike the League Championship and World Series, which are a best of seven series, the first round of the playoffs is the best of five. In a five game series anything can happen - one pitcher throws two great games, one team makes a couple of errors.