Investing Advice

Mutual Fund Advantages

Here we are, the very important section on mutual funds. I've repeated several times in this book that mutual funds should be a family's core investment.

Since there are so many types and kinds of investments and so many ways to invest your money, I'm going to offer some more straight talk - in the long run, there are only 2 things about investing that are really important:

  1. Choose a mutual fund that will make you lots of money in the coming years

  2. Get started right NOW

It's really that simple? Yep, that simple, well almost - you have to pick a really good fund.

Mutual funds can be a very foolproof way of investing. Mutual funds give people just like you the opportunity to save your money, along with other investors, in an investment account managed by some of the best financial minds in the world.

Mutual Fund Advantages

This is an ideal way for you to avoid the complications of picking your own stocks. You can also select funds that invest in bonds, government securities, real estate, precious metals, or even a combination of investments.

Other mutual fund advantages include:

  • You can get started for as little as $0 (see page 150), but $2,000 is a more common minimum. It's easy to arrange regular transfers of money from your savings or checking account to buy more shares in the fund.

  • Mutual funds give you convenient access to your money. With 24 hour telephone 800 numbers, in an emergency you can sometimes arrange next day wire transfers of money back to your bank. If you request a check, it is generally mailed within 2-3 days, although the fund is allowed up to 7 days.

  • Instant diversification. By carefully selecting your fund, you automatically have a diversified portfolio matching your investment style and risk tolerance.

  • Most mutual funds are managed by professional stock pickers. These are really smart people whose paycheck is tied to the performance of the fund that they are managing.

A downside is that many people are "sold" a fund that either doesn’t meet their investing time frame, usually with a hefty sales commission (called a load), or the fund's earnings don't even match a basic index-fund that is essentially run by a computer.

Earlier, in this book's introduction, you saw how $10,000 invested in a mutual fund in 1926 grew to over $64,000,000 in 75 years. This was demonstrated by a Pioneer Fund’s advertisement in many financial magazines, and is actually a typical result for mutual funds over this time period (it was up to $81 million in March of 2000).

Yes it's true, that the potential is even greater for a successful stock market trader. But unless you can beat the performance of a professional mutual fund manager, a wisely chosen fund is a better choice.

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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