Investing Advice

General advice about choosing a fund

Even though mutual funds are professionally managed, there is still a lot of risk by choosing a fund solely on the record of its past performance, or how well it is doing this year. Remember, choosing an investment blindly, even a mutual fund, is stupid.

Many mutual funds lose money, lots of money. For example, in the first 6 months of 2001:

  • Berkshire Focus lost 54.8%
  • Rydex Dynamic lost 52.9%
  • Van Wagoner Emerging lost 46.5%
  • It's not unusual for the top money-making fund one year, to turn around and lose 25% the following year.

    If a fund is in the top 25% in a given year, there is only a 28% chance that it will repeat this performance the following year and stay in the top 25% of funds. Last year's hot fund is rarely a top performer 2 years in a row.

    But there are funds that have outperformed the general market over 10 years in a row. This said, let's continue with your mutual fund education.

    What we commonly think of as mutual funds are “open-end funds” that shrink or grow as investors take money out or put more money in.

    There also are “closed-end” funds, where a fixed number of shares are initially sold, then the shares are traded on a stock exchange just like common stock.

    Other Stock Market Basics Topics:

    1. Mutual Fund Advantages
    2. History of Mutual Funds
    3. NAV
    4. Dollar Cost Averaging
    5. General advice about choosing a fund
    6. Mutual Fund Ratings
    7. Evaluating Mutual Fund Investment Risk
    8. Mutual Fund Share Classes
    9. Mutual Fund Fees
    10. The Mutual Fund Prospectus
    11. How important is the manager's length of experience?
    12. Why is the prospectus hard to understand?
    13. Mutual Fund Annual Report
    14. Comparing your fund to the competition
    15. Comparing funds on an after-tax basis
    16. Average Return on Investment
    17. How Not to Pick a Mutual Fund
    18. Cashing in Your Fund
    19. When to Sell Your Fund
    20. Mutual Funds and Asset Allocation
    21. When to get started with a mutual fund
    22. Types of Mutual Funds
    23. Value Stock Funds
    24. Growth Stock Funds
    25. Small and Micro-cap Stocks
    26. Mid Cap
    27. Large Cap Companies
    28. Income Stock Funds
    29. Mutual Fund Index
    30. Enhanced Index Funds
    31. Sector Mutual Funds
    32. Stock Market Sectors
    33. Defensive Stocks
    34. International Funds
    35. Real Estate Mutual Funds
    36. Socially Responsible Funds
    37. Balanced Funds
    38. Tax-Efficient Funds
    39. Bond Convertible Funds
    40. Junk Bond Funds
    41. Mixtures of stock types
    42. Closed End Funds
    43. Exchange Traded Funds (ETF’s)
    44. Stock Picking Strategy - Picking your own stocks?
    45. Fund names, and what they really invest in
    46. How to get started
    47. Where can I start investing with no money?

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