Best Funds to Buy in Your 30s and 40s

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

couple with advisor_financial planning
••• Getty Images

The best mutual funds to buy in your 30s and 40s are those best suited for long-term investing. 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 reliable mutual funds, add money to them regularly, and watch them grow for the next 20–30 years. That may be 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 and taking advantage of compound interest.

Benefits of Mutual Funds

By the time many people reach the age of 30, they have either started investing for retirement or seriously thinking about it. There is no one-size-fits-all investment strategy for anyone, but there is no doubt that mutual funds are one of the best investment types for savers of all kinds. Here are some of the reasons mutual funds are best for middle-aged investors:

  • Simplicity: It's not that middle-aged people can't handle complex financial concepts, but most investors in their middle years don't typically have large nest eggs or complex financial needs yet. Mid-life is the time when you may be too busy to learn more about investing. Follow the KISS rule: Keep It Simple, Stupid!
  • Diversification: Since mutual funds hold dozens or hundreds of securities, such as stocks and bonds, investors can get started with just one fund or easily build a diversified portfolio with just a few funds.
  • Accessibility: There is very little money or financial skills necessary to buy mutual funds. There are low-cost funds to get started investing for as low as $100, and these funds don't require a broker or advisor to buy them. The only thing needed to invest in mutual funds is money and a few minutes to open an account.

Mutual funds are not just for people beginning to get serious about investing; they are also used by professional money managers and expert investors around the world.

Best Fund Types

People in their 30s and 40s still potentially have 20–30 years before retiring, so they 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 because you have time to rebound from losses. Here are the basic types of funds that middle-aged investors are wise to consider:

Target Date Funds

These funds invest in a mix of stocks, bonds, and cash, and they change their asset allocation as it nears the target date. 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 themselves manually. 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 25 years from now, a good choice for you might be Vanguard Target Retirement 2045 (VTIVX). 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 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 68% stocks, 30% bonds, and 2% 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 lots of stocks representing various industries in just one fund. This helps you quickly develop a low-cost, diversified mutual fund. S&P 500 index funds follow the 500 largest public companies in the U.S.

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 it's worth considering adding sector funds to the mix. They 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 one sector; use two or three sector funds and allocate around 5% of your portfolio to them.

Where to Buy Mutual Funds

You 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 no-load mutual fund companies that do not charge commissions. Consider mutual fund companies that have a wide variety of mutual fund categories and types because you will need to continue building your portfolio for diversification. Some of the best no-load mutual fund companies include Vanguard Investments, Fidelity, and T.Rowe Price.

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.

Article Sources

  1. Nationwide. "Nationwide releases America’s Retirement Voice." Accessed March 26, 2020.

  2. Vanguard. "Vanguard Retirement 2045 Fund." Accessed March 26, 2020.

  3. Fidelity. "Fidelity Balanced Fund." Accessed March 26, 2020.

  4. Yahoo! Finance. "S&P 500." Accessed March 26, 2020.

  5. Vanguard. "Sector & Specialty Funds." Accessed March 26, 2020.