Choosing the Best Mutual Funds
Mutual funds are long-term investments that have historically carried less risk than other types of stock market activities. While other types of stocks may rise and fall with certain companies or commodities, mutual funds encompass numerous smaller investments over a wide range of companies, which means a single bad investment isn’t likely to damage the overall mutual fund portfolio. This makes mutual funds great for retirement planning, which should be a high priority for consumers regardless of their current circumstances. The top three mutual funds for retirement planning allow investors to make the most of their funds so that they can count on steady sources of income throughout their retirement years.
Financial specialists estimate that there are as many as 11,000 mutual funds now available to consumers who are planning for retirement. Mutual funds provide investors with opportunities to diversify their investment dollars with relatively low risk. When consumers invest in mutual funds, they join with other investors to pool their money together into one portfolio that is professionally managed. These funds can contain a combination of stocks, bonds, and even cash, reducing the risk to each individual investor who is trying to grow money over time. Many mutual funds offer a wide range of diversification within each fund, and investors can get started with mutual funds with very little cash up front.
Because mutual funds are professionally managed, there are costs associated with keeping the funds healthy and viable. For consumers who are investing in mutual funds as part of their retirement planning process, it is essential to seek out mutual funds that have low management expenses. A mutual fund that charges .50% a year to manage will obviously return more to each consumer than a mutual fund that requires 1% in expenses annually; this can add up over the course of ten, twenty, and even thirty years. It is essential for consumers who are planning and investing in retirement to evaluate the expense ratios as well as the annual returns offered by different mutual funds.
Each of the top 3 mutual funds for retirement planning have low expense rates, which is definitely a plus for consumers at any stage of the investment process. The TIAA-CREF Lifecycle Retirement Income Fund (TLRIX) has a one-year performance increase of 5.60%, but only costs .38% to manage during that same amount of time; the percentage of performance is comparable to other funds, but the expense percentage is low. Another low-expense mutual fund to consider is the Vanguard Target Retirement Income (VTINX), which performed slightly better with a 5.71% increase and only a .16% ratio of expense. Vanguard is especially popular with investors, with a strong reputation for solid returns over time.
Due to the increasing popularity of consumers investing for their retirement years, many mutual fund companies have created specific retirement income funds. These mutual funds are specifically formulated to deliver monthly income for investors in their retirement years. This type of mutual fund is a simple solution for those who want to manage their investments with a degree of flexibility. Of the top 3 mutual funds for retirement planning, Vanguard’s Managed Payout Funds provides monthly income without decreasing the principal; in many cases, the principal invested actually can increase over time. The expenses ration is only .34%, which is one of the lowest on the market, and the targeted payout is 4%. A minimum investment of $25,000 is required to get started.
When it comes to planning for retirement, there is no time to lose. Investors are wise to create a retirement plan that includes mutual funds with solid rates of return and low expenses so that they can make the most of their retirement years.