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If you’ve ever wondered, “Can I really enough for retirement with mutual funds?” the answer is yes. Financial experts say time in the market–not market timing–is the best approach to growing retirement plan assets.

Keep in mind that most retirement plans are free from the current impact of taxes. Money that grows at an average 12 percent per year doubles in about six years.

Since mutual funds simplify the issue of rebalancing the assets in the fund portfolio and because there are so many no-load mutual funds to choose from, there’s plenty of opportunities to match funds to your investment objective. Plan to check your mutual fund balances from time to time and rebalance capital amounts once a year. That’s it!

Mutual Funds for Your Investor Personality

Knowing whether you’re an aggressive growth investor or a conservative income and growth investor must guide the selection of mutual funds. A friend might like an aggressive technology stock fund that appreciated 25 percent last year.

In other words, the technology fund appreciated faster than the broad stock market. As long as the investor believes the tech fund portfolio is comprised of high-quality assets–and he or she has many years to retirement–the investor doesn’t worry if the fund’s market value falls next year.

As the investor grows a portfolio for retirement, he or she can decide to buy more of the fund to average down the cost basis or buy a new mutual fund to further diversify holdings.

Many people like the idea of “getting rich slowly.” A conservative stock mutual fund, or a stock and bond mutual fund, may be a less volatile choice for you. Others prefer low-risk investments in a tax-deferred retirement account. Treasury securities or FDIC-insured savings products might be the right choice in that case.

Mutual Fund Returns

Twelve percent isn’t a magic number. It’s based on average annual returns of the Standard & Poor’s 500 (S&P 500). From 1926 to 2011, the S&P earned slightly less than 12 percent each year. More recently, broad market returned 9.54 percent (2016), -0.73 percent (2015), 11.39 percent (2014), 29.60 percent (2013), and 13.41 percent (2012).

Based on many years of market returns, it’s reasonable to expect a double-digit average return from a well-diversified stock or index fund portfolio. To that end, the patient long-term investor must understand that the market rises and falls with investor demand, interest rates, and other factors. If you’re investing for retirement, a mutual fund is a good long-term investment vehicle.

Some decades are stronger than others, however. In the 1990s decade, the S&P 500 returned more than 19 percent per year. Averaged with the 2000s decade, the S&P returned a little more than 10 percent each year.

Check Mutual Fund Costs

Read the mutual fund prospectus with care. Look for information about the costs passed on to the investor by the fund. Even if you buy a no-load mutual fund, know that small costs of administering the fund are absorbed by investors.

How to Invest in Mutual Funds for Retirement

Start investing for retirement as soon as you can, and save as much as you can:

• If you save 15 percent of your income at age 25 (in either an employer’s 401k plan, an Individual Retirement Account, or a taxable account—or all three), diversify by investing a third of your capital into three mutual funds.

• Save 15 percent of your income every year.

• A U.S. stock market index fund, a U.S. total bond market index fund, and an international total stock market index fund are low-cost ways to diversify assets and currencies.

• Since your mutual fund investments won’t grow at the same rate, adjust amounts of money in each once a year. This is rebalancing your portfolio.

Professional investors like Warren Buffett believe there’s nothing mysterious or difficult about investing and growing wealth over time. The key to success involves consistent diversification of assets and time in the market over the long-term.

BIO:

Andrew Altman is the editor-in-chief of a website SlickBucks.com which aspires to help people learn about investing more cleverly and build a sustainable wealth.

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