Best Mutual Funds for Long Term Investors

How Long-Term Investors Can Use Mutual Funds

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Find out how long-term investors can benefit from mutual funds. Getty Images

When you hear the investment term, "long-term investing," you can assume it refers to periods of at least 10 years or more. Therefore the best mutual funds for long-term investors are the funds that are appropriate to buy and hold for a decade or more.

For example, if an investment adviser asks questions to gauge your risk tolerance, they are seeking to determine what investment types are suitable for you and your investment objectives.

The same goes for you as a do-it-yourselfer: It is important to pick the best funds that are suitable for you and your personal finance needs.  So if you you don't expect to make withdrawals from your brokerage account for at least 10 years, you may be considered a long-term investor. And if you don't lose sleep at night worrying about how your mutual funds are performing on a daily, monthly, or quarterly basis, you can take some extra risk and be more aggressive.

How to Be a Long-Term Investor

Often a long-term investor employs a buy and hold strategy, where mutual funds are selected and purchased but not significantly changed for up to several years or more. This strategy has also been affectionately labeled the lazy portfolio strategy.

A long-term investor can afford to take more market risk with their investments. Therefore, if they don't mind taking high relative risk, they may choose to build an aggressive portfolio of mutual funds.

Aggressive investors are willing to accept periods of extreme market volatility (ups and downs in account value) in exchange for the possibility of receiving high relative returns that outpace inflation by a wide margin. An sample aggressive portfolio asset allocation is 85% Stocks, 15% Bonds.

Examples of the Best Funds for Long-Term Investing

The first investment type most people think of with regard to long-term investing is stocks.

This is because they have historically achieved higher average rates of return than other investing and saving vehicles, such as bonds and Certificates of Deposit (CDs). Stock mutual funds, especially growth stock funds and aggressive growth stock funds are suitable for most long-term investors. Many long-term investors also like to use index funds for their low-cost and their tendency to average good returns over long periods, such as 10 years or more.

Fidelity Investments offer some of the best no-load aggressive growth funds, such as Fidelity Growth Company (FDGRX), Fidelity Mid-Cap Stock (FMCSX) and Fidelity Low-Priced Stock (FLPSX).

Vanguard has one of the best S&P 500 index funds, Vanguard 500 Index (VFINX).

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.