Birgit Kuester February 14, 2020 Mutual Fund
You can develop investment strategies for mutual funds. These strategies can be aimed at conserving your money or even to substantially grow your funds. Previously in "Getting Started with Mutual Funds" I discussed the key factors involved with investing in mutual funds. With these in mind you can either get going or perhaps re-think your approach to mutual fund investing.
Make sure the management team has not changed by the way. You do not want to pay for fabulous past results only to find out there is a new portfolio manager in town running your mutual fund. Watch out for the fad funds by the way. By the time an entire mutual fund sector is hot, and ripping up the charts with performance, it is too late 90% of the time, for you to be an investor. You do not want start becoming an investor in gold as it passes $1200 per ounce. That is the time you want to be thinking about exiting, not entering.
In developing mutual fund strategies it is important to recognize that most software programs, especially chart based programs, are designed to work best with stocks or ETFs. The holding requirements, short-term trading fees and round-trip penalties of most mutual funds companies require different software programs.
While both managed and index funds can yield nice long-term returns over time, I have found that if you can select the best managers in their field and allocate your assets to these top 20 percent of the fund world, you can get better returns from your fund investments. But if you are not sure whether your funds are in the top group, find out. and if they are not, you might be better off with an index fund.
The trading strategy for each group will be different. One group may only require a "minimum hold" of 30 days while another may require 90 days. A `dividend` group may result in very infrequent trades while a `sector` group may trade more frequently because of changes in the economy and offer opportunities for large gains, large profits. You may, as I have, have two or even three different strategies for the same group of funds, one based on more frequent trading then the other.
Mutual Funds are really great investment options designed to reduce risk. In general, you can further divide this form of investing into the following categories: - money market funds are considered very low risk and have very low return. Sometimes, the return on these investments is less than inflation - bond funds invest in government loans, both federal and local.
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