In the 1960's there was a phenomenal rise in aggressive growth funds (with very high risk).
Sometimes called "go-go" funds, they received the majority of the billions of dollars
flowing into mutual funds at that time. In 1968 and 1969, over 100 of these new aggressive growth
funds were established, bragging about how heavily invested they were in the new technology stocks.
A severe bear market began in the fall of 1969. People became disillusioned with mutual funds and
the stock market. "The market's toast. it'll never get back to where it
was!" was echoed by panicked investors.
Unemployment grew, inflation went crazy, and investors pulled billions back out of the funds. They
should have hung in there! Even the author of this book made the mistake of cashing in his mutual
fund shares. The fund he jumped ship on has risen 9,000% since then.
At the end of the 1920's there were only 10 mutual funds. At the end of the 1960's there were
244, and 413 in 1980. Today there are more than 6,500 unique funds and even thousands more that
differ only by their share class (how they are sold, and how their expenses are charged).
The 1970's saw a new kind of fund innovation: funds with no sales commission called "no
load" funds. The largest and most successful no-load family of funds is the Vanguard Funds.
Before we continue with all you need to know about mutual funds, here is something that merits your
attention. Since 1940, no mutual fund has gone bankrupt. You sure can't say that about banks or
savings and loans!
You may be wondering that with thousands of mutual funds and many, many types, how does one
intelligently select the best one? Well, we're going to explore the various kinds and some of their
good points and bad points.
Keep in mind that before you invest, you need to know what a fund buys, what the manager's
philosophy is, and what gives you confidence that this is a good fund to own. If you can't answer
these questions in just a couple of sentences and in a way that your grandmother can understand,
then maybe the fund isn't for you.
Choosing a fund isn't complicated unless you want to make it so. I am going to show you your
options, but if you want a no-brainer that will definitely work, just put every extra dime into the
Vanguard S&P 500 Index Fund. Keep throwing your money at it month after month and you will
outperform at least 80% of the professional money managers. The reason that we don't end the
chapter right here with this advice is that by educating yourself with additional information, you
can do even better.
Other Stock Market Basics Topics:
Mutual Fund Advantages
- History of Mutual Funds
- Dollar Cost Averaging
- General advice about choosing a fund
- Mutual Fund Ratings
- Evaluating Mutual Fund Investment Risk
- Mutual Fund Share Classes
- Mutual Fund Fees
- The Mutual Fund Prospectus
- How important is the manager's length of experience?
- Why is the prospectus hard to understand?
- Mutual Fund Annual Report
- Comparing your fund to the competition
- Comparing funds on an after-tax basis
- Average Return on Investment
- How Not to Pick a Mutual Fund
- Cashing in Your Fund
- When to Sell Your Fund
- Mutual Funds and Asset Allocation
- When to get started with a mutual fund
- Types of Mutual Funds
- Value Stock Funds
- Growth Stock Funds
- Small and Micro-cap Stocks
- Mid Cap
- Large Cap Companies
- Income Stock Funds
- Mutual Fund Index
- Enhanced Index Funds
- Sector Mutual Funds
- Stock Market Sectors
- Defensive Stocks
- International Funds
- Real Estate Mutual Funds
- Socially Responsible Funds
- Balanced Funds
- Tax-Efficient Funds
- Bond Convertible Funds
- Junk Bond Funds
- Mixtures of stock types
- Closed End Funds
- Exchange Traded Funds (ETF’s)
- Stock Picking Strategy - Picking your own stocks?
- Fund names, and what they really invest in
- How to get started
- Where can I start investing with no money?
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