Invest in a Mutual Fund through Your IRA

Mutual fund IRA investing can provide you with a steady source of growth for your retirement funds. Mutual funds make a great tool to use for those that are investing for retirement. Here are the basics of investing in a mutual fund or your IRA.

IRA Investing

An individual retirement account, or IRA, is a very valuable tool in planning for your retirement. When saving for an IRA, the government allows you to contribute pretax dollars to your account. From there, you are allowed to invest the money into different investments, in the interest can accumulate tax-free. Then, once you reach the age of 59 1/2, you can begin to withdraw the money. At that point, you will pay taxes on the money that you withdraw.

As an investor, if you can steadily grow your portfolio through investments, this represents a huge advantage to your retirement hopes. It can allow you to create a sizable retirement nest egg over the years.

Mutual Funds

Since you need to invest the funds in your IRA into something, it is important to locate the best investments for you. You need to find something that will bring in the greatest return without risking your retirement funds too much overall. Something that balances risk and reward nicely. A mutual fund can provide exactly that.

A mutual fund is a diversified portfolio that is held by many different investors. It is run by a fund manager that pools all of the money from different investors together and uses it to buy securities. Therefore, as an investor, you can buy a share of a very diversified portfolio for a small amount of money. Each time you contribute to your IRA, you can buy more shares of a mutual fund. Over time, this can result in a very substantial gain in your portfolio.

Advantages of Mutual Funds

Investing in mutual funds as part of your IRA presents you with several advantages. For one thing, it is very convenient. You do not have to do a lot of research on specific investments and securities. The fund manager handles all of this for you. You simply continue buying as many shares as possible in the funds that you like. The fund managers will handle the rest. They decide what securities to buy, how many shares of them to buy, and when to sell them. This presents you with a very passive form of investment, but at the same time it provides you with growth in your portfolio.

In addition to being convenient, the other major benefit of investing in mutual funds is that your portfolio will be diversified. When investing for retirement, you want to make sure that your funds are relatively safe. You do not want the bankruptcy of one or two companies to adversely affect your chances for retirement. Since a mutual fund by securities in a number of different companies and markets, your funds will be a lot safer as a result. This helps to lower your risk overall.

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