The Best Mutual Fund For the Young & Clueless

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The less you know about funds the more you need the best mutual fund. There's a mutual fund designed for the young and clueless that you can buy, and it puts you on cruise control for as long as you own it. Simply invest in the fund and hold on … just make sure you do not set your speed too high.

Looking for the best mutual fund is very challenging since there are thousands to choose from. What the average investor needs ideally is the best bond fund, best stock fund and a good money market fund. Then, if you could allocate the right amount of your total investment to each you would have the best investment portfolio any average investor could ask for. You would have a well balanced portfolio that promised higher returns at only a moderate level of risk.

You'll never find the best bond fund or best stock fund year after year, but with the right balanced fund you can have one of the best investment portfolios available to average investors, all in one fund or package. Let's say that you are within a few years of 30 years old and plan to retire in about the year 2040. The best mutual fund specifically designed for you that can be put on cruise control, requiring no maintenance on your part: a target 2040 retirement Fund, or simply a target 2040 fund. Here's how it works.

You put your retirement money into a target 2040 fund and the mutual fund company manages it, making adjustments as you get older. In the beginning they might invest 80% or more of your money in a variety of stock funds to give you high growth or profit potential. The rest is mostly invested in safer bond funds to give you balance and interest income. As the years pass and your retirement date approaches they allocate less to stock funds and and more to bond funds to lower the level of risk. In retirement they lower risk even more with a greater allocation to bond funds, and to money market funds to increase safety.

That's the investment industry's answer to the best mutual fund for the young and clueless. With only 10 years to go until retirement this target fund could still have most of your money, like two-thirds, invested in stock funds. Upon retirement half of your investment assets could still be in stock funds. If you are young, aggressive and willing to accept the risk of being heavily invested in stocks, the target 2040 fund could be your best mutual fund investment. If you prefer less risk, here's how to set your speed control setting down a notch or two.

Go with a target fund with a closer retirement date, like a target 2025 or 2020 fund. This way, even in the first few years, your maximum exposure to stock funds will be closer to 65%, decreasing over time. To cut risk even more put 20% or so of your total investment assets into a different fund, a money market fund. The money invested here will be safe and earn interest.

Finding the perfect or best mutual fund is less important than putting together the best investment portfolio that fits your needs and risk tolerance. With a more conservative target fund plus a money market fund on the side … you can cruise along and stay within your own comfort zone.

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Source by James Leitz