readily for spendable money.

Mutual Funds

Buying stocks or bonds issued by a single company is always somewhat risky. An individual firm may find

itself buffeted by unfavorable supply and demand conditions or hurt by unlucky or unwise managerial

decisions. Thus, a standard recommendation from financial investors is diversification, which means buying

stocks or bonds from a wide range of companies. A saver who diversifies is following the old proverb: “Don’t

put all your eggs in one basket.” In any broad group of companies, some firms will do better than expected and

some will do worse—but the diversification has a tendency to cancel out extreme increases and decreases in

value.

Purchasing a diversified group of stocks or bonds has become easier in the internet age, but it remains

something of a task. To simplify the process, companies offer mutual funds, which consist of a variety of
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