Mutual funds can be an option if you’re looking for actively managed funds that are low risk and fairly diversified.
When compared to index funds, though, there’s a clear winner.
With mutual funds, you have to pay a higher expense fee. That’s because the fund is actively managed by fund managers. But with index funds, the fees are much lower because those funds track an index like the S&P 500.
Also index funds regularly outperform actively managed funds. After all, fund managers are just humans who have to use their judgement to see what might perform well. That means they’re often susceptible to error.
That’s why we recommend you pick some reliable and historically well-performing index fund (more on this later). But if you want to consider mutual funds, here’s a good place to start.