Are Mutual fund /T BILL/BOND safer than stocks????

Can you explain me why people said mutual fund bond, T BILL safer than stocks.. how?

Well, conventional wisdom is that t-bills are among the safest investments. T-bills do provide a handy short term parking place for funds, but there are just a few things wrong with conventional wisdom. 1. the government manipulates interest rates to suit its purpose not yours. A few years ago t-bills were paying less than 2% interest with inflation running at 3%. Today inflation is running at about 4% and t-bills are paying 5% before taxes. 2. with the U S government accounts in near banrupcy status there is some question as to whether t-bills will much longer be considered safe. They may go the way of Argentina debt. 3. With the dollar falling agains most major world currencies, that 5% in a nominal rate and not a real rate.

Bonds: If they are investment grade bonds, there is less risk that they will fluctuate widely in price so long as the government maintains interest rates at a steady level. But if the government decides to increase interest rates, watch out. Back in the early1980s bond investors lost 30% of their assets in a couple of years. And then there are the bonds of GM and Ford. Don't even think of asking an investor in those bonds how they have done.

Mutual funds: As a responder has already mentioned, these are a good way to invest and avoid specific risk. In general but certainly not in every case mutual funds are safer than investing in individual stock and individual bonds because they have a pool of investments. So if there is one or two bad apples in the bund, it does not ruin the whole bunch so to speak.

The risk of equities can at time certainly be great. Many from 2000 to 2002 lost 50% or more of value and still have not recovered. But over a long period of time--10+ years a diversified portfolio of investment grade equities returns on average 8 to 10% annually. Some mutual funds have actually done significantly better.

mutual funds are much safer than stock by itself.

T-bills are "safest" *, because the debt is owed you by the US Government...if they're in trouble, the whole world is in trouble! Mutual funds are usually just a "basket of stocks", so they dilute the possible risks inherent in single stocks. (What if it turns out Company XYZ have been "cooking the books?")

That said, risk & return are almost ALWAYS inversely proportionate; the "safest" investment will nearly always give the poorest return.

*In fact, the riskiest thing you can do is to put ALL your money in low-risk investments. Think about it, if you put $1000 in a shoebox under your bed, sixty years from now you'll have $1000....If you invest it in the Dow Jones Index stocks instead, sixty year from now it will be worth at least $60,000 (worst case scenario), and possibly as much as $1.3M (historical Dow returns)

Risk is your friend. Unless you are 115 years old!

I agree with muncie.

Since the US stopped publishing the M3 report it is reported that they are printing in excess of 10% more money each year. This is sick and disgusting. Combine that with the real bad state the US is in financially and its a disaster.

Inflation is going to get much worse and sitting with tiny little "safe" investments like T-Bills are going to hurt in the long run. Principal may be gauranteed, but inflation kicks its butt and is generally much higher than the interest rate given. It's an investment that is gauranteed to lose value each year.

In other words, "great companies" are the better investment to make. Mutual funds generally hold plenty of stock and are diversified but I'd rather own a good company that does well even through recessions. If the economy has a recession your investment in a mutual fund is going to lose some value too. Pick a company that does well regardless of the general economic situation.