Can I lose money investing in mutual funds? A reasonable question asked by Capital Region families and one that most people ask first when deciding to invest. The answer is: Yes. Investing in mutual funds is subject to risk. This is why the returns are not guaranteed.
Mutual Funds are not insured or guaranteed by the federal government. Prices fluctuate daily with changes in the market. There is always the potential for downturn. However, staying invested over longer periods of time can help reduce the impact of short-term fluctuations.
Historically, the market has rewarded the patience of long-term investors with more positive years than negative years. Look at the record of positive results over calendar periods, from January 1, 1940 through December 31, 2009. (Source: Morningstar.)
- One-year periods: 53 positive periods, 17 negative periods
- Three-year periods: 60 positive periods, 8 negative periods
- Five-year periods: 60 positive periods, 6 negative periods
- Ten-year periods: 59 positive periods, 2 negative periods
- Twenty-year periods: 51 positive periods, 0 negative periods
It takes some risk to get ahead. And remember, if you take your money to a local bank, that bank isn't wrapping your money in a rubber band and putting in a vault. They're investing it...in mutual funds, or other vehicles...making lots of interest on your money. Bypass the middleman.
Dave Balog teaches financial basics to families in New York. firstname.lastname@example.org. 355-0967.