Mutual Funds Have More Advantages than Company Stock
Response to peer:
1. Advantages of mutual funds compared to company stock is that mutual funds offer instant diversification by investing in a wide range of assets, such as stocks, bonds, and other securities. This diversification helps spread risk and reduces the impact of poor performance from any single investment. It is also managed by experienced professionals who make investment decisions based on thorough research and analysis. Mutual funds provide better liquidity than owning individual company stocks, as they can be bought or sold on any trading day at the fund’s net asset value. On the other side, company stocks might have limited trading hours and may be subject to market volatility.
2. The EAR I earn from the match is 100%. I will receive a full 5% match if I invest 5% of my pay, this means I will earn 100% of the match up to 5%. For instance, if I put in 5% of my salary which is determined to be $750 ( $15,000 * 5%). My employer will match that amount up to $750. This means that I will receive a 100 percent EAR from the match. As a result, the EAR I earn from the match is 100%.
Matching plans, such as the 5% match offered by employer, can significantly boost retirement savings. In this case, the employer’s match effectively doubles the contribution, leading to faster growth of retirement funds. Taking advantage of matching plans is generally a wise financial decision, as it provides an immediate and substantial return on your contributions.
Reference
Ross, S. A., Westerfield, R. W., & Jordan, B. D. (2022). Fundamentals of corporate finance (13th ed.). McGraw-Hill
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