Birgit Kuester January 18, 2020 Mutual Fund
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 five costs of mutual fund investing are: 1. Tax Costs - excessive capital gains from active trading. 2. Transaction Costs - the cost of trades themselves. 3. Opportunity Costs - dollars taken out of portfolios for a fund`s safekeeping. 4. Sales Charges - both seen and hidden. 5. Expense Ration ("management fees") - no end to increases in site.
Mutual fund ratings while they can be accurate at times are not something to base your future investments on alone. If you rely on these alone you may as be blind folded to pick your investments. If you are into investments but you do not want to invest in one kind of stock or another, perhaps you would rather invest in a mutual fund. With mutual funds you can diversify, meaning you can buy more than one kind of stock. By diversifying you reduce the risks without losing your returns.
However, having real property as an investment does not mean you do not manage it. What do I mean? You have to be responsible and manage your equity that your home accrues and if you have investment properties, you have to manage those properties like an investment portfolio with precision planning so that it does not create a negative cash flow because cash is king. In the business world, businesses that fail to manage their cash flow properly often fail to survive. Similarly, where individuals or families fail to manage their cash flows properly they end up in the same place, bankruptcy court.
Here is what I think you should consider doing. First unless you are a real expert, consider buying Index Funds, as opposed to investing in funds that carry a high load, or sales charge associated with them. If you pay a big commission, you simply have less dollars in the investment to work with. Studies show that for most mutual funds, the commission or load simply is not worth it. Do not let a good or even a great salesman talk you into a load fund, unless you have checked for yourself, that the returns over several different periods of time have been outstanding.
If any of this scares you, rethink your investments. The asset allocation model where they show you a pie chart with so many stocks, so many bonds and maybe 3% cash is a failure. This was designed for institutions with 100% investible assets, not for individuals with lifestyle needs and expenses. You will never see any real estate in that pie chart, yet for most Americans, their home is worth more than their other investments
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