The Ten Percent Solution

 

"I didn't say that the stock market is a losing game. I said that buying and selling stocks on your own or on your broker's advice is usually a losing game. The stock market has actually been very good to investors who have the qualities we spoke of earlier: intelligence, courage, patience, and an eye for value," Roy replied.

"A carefully selected mutual fund gives you access to a professional money manager who demonstrates those qualities. You won't be making the individual investment decisions. A professional will.

"Simply stated, a mutual fund is a professionally managed pool of money. The pool is made up of money from people like you and me, people numbering in the thousands. We all put our money together and hand it oyer to someone who knows, or supposedly knows, what he or she is doing.

"There are all sorts of benefits. Most important is the one I just mentioned: professional money management. Second, mutuals give you diversification. Most people don't have enough money to buy a properly diversified portfolio, one with stocks in different industries in a variety of countries. By pooling resources, individuals can gain a pro-rata share in a vast array of securities. 'Don't put all your eggs in one basket,' and all that stuff. Third, mutual funds are a hands-off investment. No ongoing research and decision-making process is required. This feature is very important. Most of us don't have time to look after our investments. We work all day. With mutual funds, that isn't a problem. They have a low PITA factor."

"What's a PITA factor?"

"Pain In The Ass factor . . . a highly technical invest-ment term," Roy chuckled.