Best Funds to Invest in Your 30s and 40s

How to Invest With the Best Types of Mutual Funds in Your Middle Years

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Are there certain mutual funds you should own in your 30s and 40s? While the mid-life crisis might be a reality for many people, there is no reason to panic about investing. All you need to do is pick the best mutual funds, add money to them on a regular basis and watch them grow for the next 20 or 30 years.

Of course, that's a bit of a simplification, but there's not much more to smart long-term investing than sticking to the time-tested saving and investing practices.

Why Mutual Funds Are Best for Investors in Their Middle Years

By the time people reach the age of 30, they have either started investing already or they are seriously thinking about it.

While there is no one-size-fits all investment strategy for people in their 30s and 40s, there is no doubt that mutual funds are one of the best investment types for savers of all kinds to take advantage of the strength and diversity of mutual funds.

Here are some of the reasons mutual funds are best for people beginning to get serious about investing.

  • Simplicity: Not that people in their 30s and 40s can't handle complex financial concepts, it's that most investors in their middle years don't typically have large nest eggs or complex financial needs.
  • Diversification: Since mutual funds hold dozens or hundreds of other securities, such as stocks and/or bonds, investors can get started with just one fund or build a portfolio with several funds.
  • Accessibility: There is very little money or financial skills necessary to buy mutual funds. In fact, there are low-cost funds to get started investing with just $100 and these funds don't require a broker or advisor to buy them. The only thing needed to invest in mutual funds is a little money and a few minutes to open an account.

    But mutual funds are not just for people beginning to get serious about investing. They are used by professional money managers and expert investors around the world.

    Best Fund Types for Investors in Their 30s and 40s

    People in their 30s and 40s still potentially have 20 or 30 years before reaching a big financial goal like retirement. Therefore middle-aged investors are long-term investors. Although all investors should be aware of their own investment objectives and risk tolerance, the longer you have until you need your money, the more aggressively you can invest.

    Here are the basic types of funds that middle age investors are wise to consider:

    • Target Date Mutual Funds: As the name suggests, Target-Date Mutual Funds invest in a mix of stocks, bonds, and cash that is appropriate for a person investing until a certain year. As the target date approaches, the fund manager will gradually decrease market risk by shifting assets out of stocks and into bonds and cash, which is what an individual investor would do manually themselves. Therefore, target-date mutual funds are a type of "set it and forget it" investment. For example, if you are saving for retirement and think you may retire around the year 2035, a good choice for you might be Vanguard Target Retirement 2035 (VTTHX). Then you can end your research, periodically add new money to the fund, and watch your nest egg grow as you go on about living your life!
    • Balanced Funds: Also called hybrid funds or asset allocation funds, these are mutual funds that invest in a balanced asset allocation of stocks, bonds and cash. The allocation usually remains fixed and invests according to a stated investment objective or style. For example, Fidelity Balanced Fund (FBALX) has an approximate asset allocation of 65 percent stocks, 30 percent bonds and 5 percent cash. This is considered a medium risk or moderate portfolio.
    • S&P 500 Index Funds: Index funds can be a great place to begin building a portfolio of mutual funds because most of them have extremely low expense ratios and can give you exposure to dozens or hundreds of stocks representing various industries in just one fund. Therefore, you can meet the initial goal of getting a low-cost, diversified mutual fund. For more on index funds, check out our Index Investing FAQ page. Again, Vanguard, Fidelity, and T. Rowe Price are good mutual fund companies for index funds. You can also look at Charles Scwhab.
    • Sector Funds: For those middle-aged investors with relatively large nest eggs, such as $100,000 or more, a fully diversified portfolio might consist of a few broadly diversified index funds but these investors may consider adding sector funds to the mix. As the name implies, sector funds focus on industrial sectors of the economy, such as healthcare, technology, or utilities. When investing in sectors, it is important to remember not to allocate too much to any one sector. For example, use two or three sector funds and allocate around 5 percent of your portfolio to them.

    Where Investors Can Buy Mutual Funds

    Any investor, assuming they are at least 18 years, can buy mutual funds at virtually any fund company or brokerage firm that offers them. The best place to buy mutual funds for anyone who wants to invest without an advisor should use one of the best no-load mutual fund companies. "No-load" funds are those that do not charge commissions, which are only necessary to pay if you are using a broker.

    You will want to consider mutual fund companies that have a wide variety of mutual fund categories and types because you will need to continue building your mutual fund portfolio for the purposes of diversification. Some of the best no-load mutual fund companies include Vanguard Investments, Fidelity and T.Rowe Price.

    Disclaimer: The information on this site is provided for discussion purposes only, and should not be misconstrued as investment advice. Under no circumstances does this information represent a recommendation to buy or sell securities.