Mar 252010

Buying mutual funds can both be a simple process as well as an exercise in frustration. The number of choices alone are dizzying, but the cost of a mutual fund is a bit confusing at times. Recent advice would tend to suggest that you should examine much more than just the expenses when considering a mutual fund, and this still holds true more or less.

Common wisdom suggests that it is best to avoid mutual funds with high expenses. Why bother to fight for modest returns when the fund manager is racking up expenses. However, the performance on a fund is usually given with rate of return after expenses–that is, after all of the operating expenses have been accounted for. The cost of owning, not buying, a mutual fund is usually defined as its expense ratio. The cost of buying a mutual fund is defined by its sale load.

The expense ratio contains the fees involved in running the fund including costs like the management fee and the operating costs. The price of sending out mailings, and in some case advertising for the fund, all fall under the category of costs. The expense ratio of mutual funds vary quite bit surprisingly. Some of the more efficient index funds have relatively low, like around .20% expense ratio, while the more expensive mutual funds sit around 1.5-2%.

The big problem with expensive mutual funds is that they are always hindered by that expense. The rate of return might go up and down, fluctuating with the market or economy, but that big up front expense will remain constant. A nice yield is hard enough to produce without having to fight against the tough odds of high costs.

Ultimately, there is more to consider than the expense of a mutual fund–the historical performance of the fund as well as the risk profile being among those. Still, a relatively expensive fund shouldn’t be completely ruled out if all the other factors fall in its favor.

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Oct 272007

I’ve longed enjoyed the common sense, straightforward advice you find over at the Motley Fool, and the information in this article on trying to beat the market is no exception. There’s some nice advice in this little article, mainly that you shouldn’t try to beat the market unless you’re willing to put in the work…and even then, don’t count on it. To put it simply they say “either commit to investing, or commit to indexing.”

Now, the article does mention that most mutual funds fail to beat the market, noting that “some 75% of fund managers fail to beat the S&P 500 on an annual basis.” So why are there so many mutual funds out there pegging away, shooting for higher returns? Simple, it’s a very lucrative market. The article claims that “fund companies are pulling in some $117 billion per year simply in fees.” No wonder we talked about selling your mutual funds the other day.

The bottom line is this: if you don’t want to sweat it out and spend countless hours feverishly hunting for just the right stock combo to buy in order to beat the market, sit back, relax and invest in a nice, consistent index fund. Not quite as sexy as you might like, but relatively safe and reliable.

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Oct 242007

Just yesterday I talked about selling your mutual funds, but I’m not sure that’s an option for everyone, nor do I think it’s necessarily a good idea. It does, however, force you to think a bit about where you money is going. Another possible consideration when you’re looking to invest is where exactly is your money and how is it being used. If you follow the money trail, you could be surprised to find yourself profiting from actions or companies that you don’t particularly agree with– Others, perhaps, don’t care what’s happening or who’s getting harmed, just as long as you’re making money.

For the former group of folks interested in investing towards more socially responsible ends, there is something called SRI, or Socially Responsible Investing. The market for such investments is huge, although the lines are difficult to draw. One man’s vice is another’s passion. Broadly speaking, though, SRI is considered to be interested in business that is environmentally friendly, concerned about human rights, product safety, workplace diversity and so forth.

If this is something that interests you, it would probably be worth your time to do some research. There are certainly funds set up that specialize in SRI and there’s actually a lot of information on the subject once you start your hunt.

Oct 232007

Interesting article in MarketWatch that discusses a book entitled: “The Lies About Money: Achieving Financial Security and True Wealth by Avoiding the Lies Others Tell Us, and the Lies We Tell Ourselves.” Basically, part of the book advocates selling all of your mutual funds because the industry is completely corrupt and is only in business to profit off of you.

Ric Edelman, the author, stands behind his statements, noting that “we have sold all our investments in retail mutual funds. All my colleagues at Edelman Financial have done likewise and our clients are following our advice. You need to sell all your retail mutual funds too.” Food for thought, that’s for sure.

So, you’ve sold all your mutual funds, now what?  Well, you have to buy the book to find out.  The author of the MarketWatch article, however, advocates that a portfolio with some no-loan index funds are still appropriate and a good investment.

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Aug 252005

Mutual Funds are considered to be one of the best investments one can get hands on. They’re very flexible and cost-effective. An excellent investment for people with restricted knowledge, time or, money. For beginners, who might have a perplexed expression on their faces at the mention of mutual funds; let me first acquaint them with what the mutual funds are all about. Continue reading »

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Jan 232005

While pursuing the search for the best mutual fund, some mutual fund investors tend to predominantly focus on fees and expense ratios. The rationale is that by choosing mutual funds with low fees, investors will have more of their capital invested. Also, no load mutual funds with low expense ratios will pass on more of the returns they earn to their shareholders. Continue reading »

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Jan 172005

If you are a baby boomer, time is not on your side. Many baby boomers see retirement age fast approaching with little to nothing in the way of retirement assets that will allow them to actually retire and live a comfortable lifestyle. With the benefit of time in short supply, substantial investment performance in a shorter than normal time frame becomes strikingly important.

Mutual Fund Advice:

A case could be made that a special type of mututal fund, an index mutual fund, in conjunction with careful market trend analysis (not predictive market timing) could be used to achieve higher returns faster than a standard mutual fund.

As to the specific type of index fund to consider using, investors would do well to “keep it simple” and use an index fund that tracks well known indexes like the S&P 500, Nasdaq100, and Wilshire 2000.

Index funds that track any of the major indexes are just taking advantage of the concept of diversification. The only remaining risk is whether the entire market goes up or goes down and one can switch to a fund that is designed to profit from a down market when such action is called for.

There are very few active investment managers that outperform index funds or exchange traded funds over a five year or greater period. This is why an index fund is recommended in the case of baby boomer-aged investors who need stellar performance over shorter time frames.

* Mutual Fund Selection

* Mutual Fund Action plan

* Mutual Fund Research

* Mutual Fund Investment tools

Article by C.C. Collins of

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