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Mutual Funds?
I have a small amount of money I would like to invest. I have heard of mutual funds but what are they? how do you get them? how much do they cost? how much money can you make from them? Is there a certain amount of time you have to wait before getting the money from them? Do they require any “upkeep”? Anything else I should know about mutual funds?
Do you have suggestions for other easy investments that would be better than a mutual fund?
Sorry for so many questions but i would really appreciate someone knowlegedable to help me out. Thanks!
Filed under: Mutual Funds · Tags: funds, Mutual
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Here’s What I Know About Mutual Funds!
(I’m only 16 so I hope I can be some help but here is what I know for fact.)
Mutual funds are investments that pool the money of many investors and place it in stocks, bonds, and other holdings.
Mutual funds are the most common investment vehicle for individuals because they don’t require a lot of money to get started. They carry some other advantages as well.
When you put your money into a mutual fund, you’re throwing your money into a pot with another couple hundred million dollars or so.
A portfolio manager and a team of researchers are responsible for finding the best places in which to invest the money. While a portfolio is a group of investments assembled to meet an investment goal, a portfolio manager is someone who is paid to supervise the investment decisions of others. The managers get paid for their services from a fee within the fund, usually a percentage of the value of the fund. Although you don’t see this fee, you should remember that it exists. The terms “portfolio manager†and “money manager†are used interchangeably. Both handle the management of a portfolio, be it for individuals or for a mutual fund. They are paid a percentage of the assets under management.
In addition to the portfolio manager’s fee, there are several other fees you need to be aware of when deciding which mutual fund is right for you:
1. No-load mutual funds let you avoid paying a sales commission on your transactions. No-load funds are shown by advisers who receive compensation otherwise, often by an hourly rate. The companies that offer no-load funds have toll-free phone numbers that you can call for recommendations of what funds to buy.
2. Load mutual funds pay sales commissions to a broker, financial adviser, insurance consultant, and so on. The load, or a portion of it, is paid to the adviser who recommends the mutual fund to you. If your mutual fund has a load, know how much it is and how you pay it. Fund loads/fees should be reviewed by the salesperson and stated in the prospectus (paperwork) sent from the company. Load funds have front-end loads, deferred sales charges, or back end loans:
2A. Front-end loads are fees paid up front.
2B. A deferred sales charge permits the load to be postponed, and it gradually declines over a period of years until the sales charge is 0.
2C. A back-end load means you pay a set fee upon the sale of the mutual fund.
Mutual funds can offer you some great advantages:
1.Money can be taken directly from your bank account each month and transferred into a mutual fund. This makes investing nearly painless.
2.Mutual funds can offer “diversificationâ€. (Diversification is investing your money in different securities in different industries hoping to protect your investment against one or more companies undergoing financial disaster.) If you are “diversifiedâ€, and one or more of your investments hits a slump, then you can rely on your other investments to boost your total portfolio. You could, for instance, divide your money among three or four different types of stock funds, ensuring that you’d always have some money invested in a profitable area of the market. Part of diversification is also investing in bonds, as well as different types of stocks. It can be difficult for you to plan that diversification on your own, which is why people look to mutual funds to diversify their portfolios.
3.It doesn’t cost much out-of-pocket to buy mutual fund shares. If you purchase a no-load fund, you do not pay a sales charge buy the fund. “Brokerage†for the investments within the mutual. Fund, or the cost of buying or selling shares of the stocks or bonds, are generally far lower than standard brokerage, because the fund managers buy or sell so many shares of a security at one time and buy and sell frequently. Having this power enables them to negotiate traders for a lot less money than you could on your own. Many people assume that mutual funds do not pay to trade securities, but that’s a false assumption. Fees occur whenever a security is traded; although the fees are usually lower inside a fund, due to the large number of shares traded.
4.The Securities and Exchange Commission (SEC) oversees the records and expenses of all mutual funds.
5.You can direct almost any amount of money to where you want it. If you’re into a mutual fund for the long haul, you can direct your money to funds that invest more heavily in stocks instead of directing your money to the more conservative bond funds.
If you’re looking for mutual funds that don’t require a lot of money to open or to be contributed to each mouth, consider the following options. They all were given high ratings by “Morningstar Mutual Fundsâ€, a newsletter published twice a month by Morningstar, Inc. in Chicago:
American Funds: 1-800-421-0180 http://www.americanfunds.com
Fidelity Funds: 1-800-Fidelity http://www.fidelity.com
Oakmark Funds:1-800-Oakmark http://www.oakmark.com
T. Rowe Price: 1-800-638-5660 http://www.troweprice.com
Vanguard: 1-877-662-7447 http://www.vanguard.com
One final advantage of mutual funds is that they carry almost no risk of going bankrupt. Due to diversification within a fund, a mutual fund is very unlikely to lose its entire value.
Take a careful look at mutual funds as you begin to think about investing your money. They’re a great place to start investing and are an excellent vehicle in which your money can grow.
If you decide mutual funds are not for you, you can always invest in real estate (if you are wanting long-term investing). You can invest in stocks or bonds also.
Go to your nearest book store and purchase “The Complete Idiot’s Guid To Personal Finance in Your 20s and 30s Third Editionâ€. It has helped me understand everything about personal finance. The book is a great guide.
(Let Me Know If I Was Of Some Assistance)
Investing does not require you to have money. The most important thing to have is education, self control plus experience in what you want to invest in.
Also your investment vehicle depends on what your goals are, your risk assessment/management. All I can say is that I”m not a fan of mutual funds. The cash flow it gives is pathetic and the return on investment in heartbreaking. Also, the risk exposure is too great. However, if you have no experience and no idea about what investing really is, it is probably the best investment for you.
Mutual funds are an affordable way for an uninformed investor to diversify their investments to minimize risk. They are good in the respect that it allows you to probably not lose all your money if one or two companies go bad.
On the other hand, they often have many charges incurred along with them for upkeep or maintenance and things like that. And often, the funds that have the highest amount of charges because they have the most active management often don’t show any better performance than a fund with little charges/activity.
In the end though, mutual funds often don’t even beat the market performance, and returns can be harder to figure out on a daily basis. If you want to be able to see how you’re doing easily and up to the minute, consider an index fund which contains weighted pieces of a number of large stocks (like a NASDAQ or DOW index fund).
On the plus side though, you can get money mutual funds from which you can write checks or even make interact payments, so basically operate like a bank account with higher interest.
Mutual Funds are great! You can buy no-loan mutual funds directly from the company with no commission or agent. Get a copy oif Sheldon Jacob’s book “No Load Funds” from Amazon, lotsa used copies cheap, and really read it.
Then check out morningstar universities free website at morningstar.com.
fundxfunds, vanguard funds, tiaa-cref funds are just three of hundreds of excellent places where you can find good funds.
You will not get anything extra if you pay a commission to buy a mutual fund, so don’t. Scottrade and Schwab are good places to open an account once you have a clue.
Get a clue first.
Good luck.
Hi, i suggest a great site with plenty of Issues related to your Investing and everything around it. it also provide clear and accurate answer to many common questions.http://investing.sitesled.com/
I am sure that you can get your answers in this website.
Good Luck and Best Wishes!
May want to check Index investing or read some books on value investing. It may change your view on mutual funds investment.
Good luck…
How much money do you want to invest?
Mutual Funds may not be the best choice for you.
A mutual fund is a basket of stocks, bonds, options, or commodities that spreads your risk around so that you don’t lose all your money on one particular investment vehicle.
The money is pooled together and a firm runs the fund.
The upsides are that you don’t have just one stock that will break you. So diversification and professional management are your positives.
The downside is that mutual funds are sorta slow to make money from. They go up very little over the year in my opinion. If you do want a fund, make sure it is a NO LOAD fund. Another downside is that if a mutual fund goes down in a year, it takes so much time for it to turn around and actually make you money.
Check out the Vice Fund (VICEX). They invest in companies that sell vices, such as cigaretts, gambling, alcohol.
An easier investment would be a Certificate of Deposit (CD) from a bank. They yield 6% a year right now. Go to your local bank and set one up. You’ll be glad you did because it is guaranteed money.