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Remember that there are no financial investments that can guarantee a return short of a government bond or bank certificate of deposit. In the case of the former the worth of the bond depends on the integrity of the government. In the case of the latter the CD depends on the continued existence of the bank. For stocks and stock mutual funds, the worth of a share depends on whether the company continues to be solvent.

Financial advisors and analysts have propounded stocks for many years now, highlighting their average annual returns of over 10%. The figure of 10% however hides a much rockier truth. It is actually an averaging of very good years with very bad years. There is almost a fifty percent change that the broader stock market falls into negative territory. Anyone can use mutual fund performance comparison tools to calculate these numbers.

Investors pick up two pieces of knowledge from this. Those who are in the investing game for the long term are likely to walk away winners from investing in stock market mutual funds. Those who are in the game for a much shorter time, experience substantial risk.

The question is what does short and long term mean? The most reasonable definition of long term is the time period required to wait for the fluctuations to smooth out for stocks to show a guaranteed gain. This is often given as a figure of 10 or 20 years. Therefore, people near retirement might want to consider a less volatile investment.

For investors who are nowhere near retiring, investing in the stock market early on means that there is more time to ride out the ups and downs. For such investors, it is suggested that they own anywhere from 80% to 60% stock. Every year they should consider readjusting the portfolio balance to reflect an appropriate level of risk.

Young investors should still be aware that the stock market fluctuates wildly. Playing it by withdrawing from the fund or returning into the fund leads to unintended consequences later. Instead, the young investor should abide his or her time and wait out the fluctuations.

Readers wishing to know more can browse over to learn about bond mutual funds.

Tags: stock market investing, finance, Personal Finance

Tags: finance, financial planning, financing, investing, investments, money, mutual funds, Personal Finance, retirement planning, stock market, stock market investing, stocks, wealth building