Mutual Funds are a wonderful way to prepare for your future, whatever that may be. If you want to have your house paid off, a nice car, and early retirement then a mutual fund is a legitimate and low risk way to do so. If you want to have save a million bucks, simply putting your savings into a bank savings account earning 0.02% interest isn't going to get you there fast enough.
A mutual fund uses compounding interest to help you earn money. I've made a simple video explaining compounding interest:
Now that you know how compounding interest works, it should be fairly easy to decide you want to invest in a mutual fund! As a disclaimer, mutual funds do carry risk and there are several types always do more research before investing.
I'm going to give you guys a glimpse into my fund which I've held since July of 2009:
My first investment was for $1,000 and I originally planned to re-invest $1,000+ every year but it hasn't been good for on the job market lately. However, as you can see even after 3 years I've earned nearly $400 all thanks to compounding interest (and the market recovering!)
There are several ways to invest in mutual funds through financial advisors and online. What I have learned since opening my mutual fund that there is one mutual fund that is constantly returning high % returns and outperforming the other funds, the Vanguard 500. Personally, when I get my next $1,000 I will be investing in that one.
Update: 01/16/24
I no longer own these mutual funds and find they are mostly a bad investment vehicle. Just view the top 10 holdings of several mutual funds and pick 5 of your favorites, then hold. Atleast you can see where my head was over a decade ago at age 20 or 21
