#6 Mutual funds
Image Source: Chris Potter
Mutual funds might be looked at as a safer way to invest in the stock market. There are mutual funds that invest in many different things but those that invest in the stock market at the most popular. Mutual funds pool the money that’s invested by a large number of people and invest it in many different stocks. That strategy reduces the risk for every investor, since it is far less likely that 100 companies will all fail or do poorly in the future. When you invest in a single company, the outcome depends entirely on how that one company performs. Mutual funds reduce that risk by spreading it out across a number of companies. As always, with less risk you also have to expect rewards that aren’t as great. Mutual funds are a good way for the novice investor to test the waters and gain some experience with the stock market.
