Where is the best place to start my research? My current knowledge is limited and most websites with advice become complicated very fast. I need some help just to get started. Thanks!
Re: where to find out about investing in mutual funds
Oh. No replies.
Shall I just stuff all the money under my mattress?
Re: where to find out about investing in mutual funds
I am assuming you are in US and employed. Do you have a financial advisor assigned to you through your company?
Re: where to find out about investing in mutual funds
In us and self employed, well hubby is. We have some extra this year and have been advised to invest rather than moneymarkets but I don't know much. He asked me to research.
Re: where to find out about investing in mutual funds
I think you should start by googling the term (I am assuming you have already done that) and read as much material is available. Next would be to find out a good investment firm (scottrade, vanguard) through which you can start investing your money.
I am sure that some other guppies who are more expert in this area would come and give advice
Re: where to find out about investing in mutual funds
Hmm. Did that already and have been advised to buy index funds directly from the , what? Company? Fund? Don't know the term but apparently buying direct reduces fees. I thought someone here would know better or direct me in the right direction.
Re: where to find out about investing in mutual funds
Just saw this. In terms of mutual funds, they are arraangd based on
1) geography - domestic vs international
International funds focus on
1) europe
2) australia
3) japan
4) emerging markets
5) or all of above.
There are GLOBAL funds that invest all over the world ( including US).
Rule of thumb - stock portfolio split 60 to 80% US 40 to 20% international. Emerging mkts more VOLATILE - so some way don't put motlre than 5 to 10% there. Some say that is where growth is.
Re: where to find out about investing in mutual funds
Now each fund falls in following categories
1) large cap hold stocks > say 5 billion
2) med cap 1 to 5 billion
3) small cap < 1 billion
These are guidelines off top of my head.
Each of these fall into 3 categories
1) value
2) blended
3) growth
Value funds have low P/E ratios. That is for each dollar of earnings the price u pay is low. In theory these stocks have low growth rate.
Growth stocks have high P/E ratios. In theory their growth rate is very high.
Blended ( or is there another term Aaaliya?) Stocks have a bit of both. Not very low or high P to E and not very low or high growth.
Re: where to find out about investing in mutual funds
Since each fund of a particular size ( small cap med cap large cap) can have one of 3 styles, you have a universe of 9 (3×3) types of funds to choose from.
Since there are at least 5 types of funds based on geographical focus, the universe of funds just expanded to 9*5 = 45. (TLK would call this the entropy effect).
So what is an investor to do?
Re: where to find out about investing in mutual funds
If you read financial magazines, they bombard you with various fund information. Each quarter you have funds that have outperformed the rest. Morningstar gives 5 ***** rating for best funds. How useful? They tell you what has happened. So not very.
Re: where to find out about investing in mutual funds
I don't believe in mutual funds. Why pay someone to manage your funds when you can do it yourself and better, but I guess you can speak to some brokers if you want to purchase. If you just need information then you can get their reports.
Re: where to find out about investing in mutual funds
Most actively managed mutual funds use the market as benchmark. But their management fees take a 1 to 3% bite of your assets. Add to that the fact their turnover is 50 to 200% on average ( they replace a stock once in 2 yrs to once in 6 months). {Figure off top of my head). So transaction cost add up yo another 1 to 2%. Plus since their timing is ok to awful 80% of them underperform the market - on average by 1 to 2 %. So that is 3 to 7% underperformance per year!
That is why low cost Index Funds are no brainer.
The Vanguard Total Market Index Fund mimics entire US Market. You get all 9 styles in 1. Fees - about 0.1 to 0.2% of assets! Turnover very very low.
The Vanguard International Index fund should cover your International exposure needs.
Say 70 to 80% in former and 20 to 30% in latter would be a good start. YOU WILL AUTOMATICALLY BEAT 80% OF ACTIVELY MANAGED MUTUAL FUNDS OVER THE LONG TERM.
GOOD LUCK!!