Heike Moeller February 24, 2020 Mutual Fund
Mutual funds are no doubt the best way to invest. Just study the market and understand your options. If you do your research, you will be able to pick a fund that will benefit you in the long run. Investigate the company and know what you are getting into. Do not leap before you look first. You may end up getting less than what you bargained for it you do.
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.
All the matters are the long term trends, and in the long run stable value funds barely keep up with inflation. Unless you are talking about a lifestyle fund, or a couple of very broad based index funds, you are probably not going to get the diversification you need from such a small number of funds. Generally speaking, if you are given the choice between two funds that cover the same asset class, you probably want to pick the one with the lower cost. Select funds that cover different asset classes.
Ask you financial adviser to show you the fund ratings or do your own research if they will not. Otherwise find yourself a good Fee-Only financial adviser that gets paid to provide you with these top fund choices and help you invest in the "best of the best" no-load funds without any conflicts of interest.
Actively Managed Funds: All mutual funds that are actively managed by a fund company in an effort to add value to shareholders returns fall into this category. In theory, an experienced portfolio manager can surpass the returns of an index fund by making well-timed and disciplined trades. The unfortunate reality is that the vast majority of fund managers do NOT beat their index. But the good news is that the top 20% of these funds can and do on a regular basis. We will try to focus on this group of quality managers.
The four-letter word that no business can live with out and is referred to as the lifeblood of any business is CASH. Accordingly, the individual investor is better served when they think like a business and create cash flows to deploy with leverage into arbitrages. What did he just say? If these terms are foreign to you and you claim to be an investor you better go look them up because they are as old as salt in the financial world and are the best investment advice three self-made billionaires on Forbes 400 ever heard. If you do not know how to enlist cash flow, arbitrage and leverage into your investment plan then seek out a firm that does before it is too late.