Inside Mutual Funds » Mutual Fund Investing

Mutual Funds Vs. ETFs

Jeff — Mon, 15 Mar 2010 11:00:41 +0000

You’ve decided that you’re ready to invest. You want to save for your retirement years. You want to make sure that you’re financially comfortable long after you’ve quit working.

This is a commendable goal. But now the real work begins: You have to decide in what investment vehicles to sink your money. Two worthwhile contenders for your dollars are mutual funds and Exchange Traded Funds. Both provide the diversification that is so important when investing. And neither ETFs or mutual funds come with exorbitant costs.

So which investment vehicle is best for you? That depends on your investing goals and your personal financial situation. But here are some basics about both mutual funds and ETFs to help you decide which makes the most sense for you.

When you’re putting your money into a mutual fund, you are often paying for a team of investment managers that decides which stock stocks to buy and which to sell. The hope, of course, is that the stocks in your fund perform well. These are considered safe investments because your money is spread out over a wide range of stocks.

ETFs work a bit differently. These funds track a specific index. Usually, a large company – often the same ones that run mutual funds – will create a grouping of stocks that represent a specific index, anything from the NASDAQ to the S&P500. These stocks are deposited with a holder, and the company behind the ETF receives a certain number of what are called creation units. These units are large blocks of shares that are eventually split up into the individual shares that are then traded on the market.

Which investment vehicle makes the most sense for you? That depends on what you’re looking for.

With mutual funds, you generally buy your shares and hold onto them for a long period of time. With ETFs, though, you can buy and sell as many times as you’d like. This can be exciting. It can also be risky. Just ask all those people who lost tons of money by day trading.

Mutual funds generally come with minimum payments for entry. You have to buy a certain amount of shares to participate, and for some funds this minimum isn’t tiny. But ETFs don’t require any minimums. In other words, you can buy as few shares as you’d like.

There is no right or wrong answer here. Both ETFs and mutual funds are generally considered to be strong investments. Their differences, in fact, aren’t all that significant. Before investing your dollars in either vehicle, though, make sure to do your homework. You can make solid money with either ETFs or mutual funds. Unfortunately, you can lose a lot of money with either investment vehicle, too.

Uncovering The Hidden Costs Of Mutual Funds

Jeff — Sun, 14 Mar 2010 00:35:38 +0000

Think you know exactly how much your mutual funds are costing you each year? Think again. The unfortunate truth is that many funds come packed with hidden mutual fund fees, fees that most consumers have no idea exist.

But you want to be an educated consumer, right? If that’s the case, you’ll take the extra time to compare mutual fund fees and find the hidden costs of your funds. And depending on how high these costs are, you might even move your dollars to funds that don’t have quite so many of these secret fees.

Mutual funds come with many upfront fees, fees that are freely advertised by your fund company. These include management and redemption fees. There’s nothing too mysterious about these fees.

But then there are the fees that are rather mysterious, the brokerage fees. Simply put, these are fees that investors are charged when their fund managers buy and sell securities. These fees are not included in the expense ratio that funds distribute to their investors.

This seems a bit fishy, but it’s how mutual funds have long conducted business. It does make it difficult, though, for those consumers who like to shop around to make sure that they are investing their money in mutual funds that charge the least amount of operating and management fees.

As one of these conscientious investors, how to you determine these costs? How do you make sure that you’re not paying too much in fees to your mutual fund?

You’ll have to read a document called the Statement of Additional Information. All mutual funds are required to have one of these. It lists the transaction costs – all of them – that funds have charged in prior years. You might be surprised at how much some of these funds charge.

Finding this statement can take a bit of hunting. You can visit your mutual fund’s Web site and poke around. It might be listed there. But if you’d like to avoid the frustration of a possibly fruitless search, call your mutual fund’s customer service line. The person on the other end of the line should be able to tell you how to get a copy of your fund’s Statement of Additional Information.

No one likes to pay the operating fees that mutual funds charge. They’re a fact of life, though. What you don’t want, though, is to be paying hidden fees that you don’t even know about. These fees can add up to some hefty dollar amounts over the years.

Are mutual funds a good investment?

Jeff — Sat, 13 Mar 2010 00:58:52 +0000

You’ve decided it’s time to start investing. You’ve heard and read about mutual funds. Everyone you know, it seems, is investing money in these vehicles. But you’re not quite certain. How do you know if mutual funds are right for you?

You have many choices when it comes to investing your dollars. You can put your money in the stock market. You can open a traditional or Roth IRA. You can place your money in such safe investment vehicles as bonds or certificates of deposits. You can even leave your money in your bank’s savings account.

Why, with all these options, should you go with a mutual fund? The answer to this, of course, depends on your current financial situation and your investing goals.

Mutual funds are well-regarded because they spread investors’ dollars over a wide range of investments. This means that investors diversify their money. If one particular stock or bond isn’t performing well, it will be offset by the other securities in a mutual fund that are doing well.

Many mutual funds also come with the investment services of money managers. These managers study the way various securities are performing. They then allocate investors’ dollars in the hope of maximizing their growth.

Because of this, a mutual fund might make sense if you’re a bit averse to taking risks with your dollars. There is no guarantee of success when you invest in any mutual fund. But the odds of you losing big dollars are not as high as they are with riskier investments. Most people who invest in mutual funds do it for the long haul: They understand that the value of their mutual fund investment will ebb and flow according to several factors. They are willing to wait out the bad times for the good times that they expect to follow closely behind.

By the same token, if you prefer the highs that come with investing in riskier ventures such as the stock market, a mutual fund might not be the best choice. The stock market hold the promise of immediate gains, and the specter of quick losses, too. Of course, mutual funds, because their securities mix almost always includes stocks, come with a bit of this, too. When you invest in the stock market, though, the highs are lows are much more intense.

Before investing in any vehicle, whether it be the stock market or a mutual fund, it’s your responsibility to first look at your own financial situation and goals. You might seek advice from others. But ultimately, whether to invest in a mutual fund is your call.

Mutual Fund Investment Strategies

Jeff — Wed, 23 Dec 2009 01:17:09 +0000

Mutual Fund Investment Strategies

Mutual fund investing can be referred to as a way to mitigate risks and resorting to a proactive mode of managing any anticipated losses. Unlike stand alone stock investing firms which bear the entire burden of any loss incurred in stock market trading, mutual fund investments are a pool of resources from various investors where the profits as well as losses are shared mutually and equally. Hence, you cannot enjoy the entire gain and also, you are not alone to repent at the losses. This is one of the reasons why mutual fund investment strategies are probably a good strategy for you.

First Steps For Your Mutual Fund Investing

Mutual fund investments work on the principle of higher share, higher profit or loss. The person investing more will enjoy greater monetary benefits but will also suffer greater losses. The only benefit is that the losses are being shouldered by a large number of people otherwise you would have to bear the burden of a greater amount of loss.

When going for mutual funds investments, first try to make proper research about the mutual fund investment firm which you have chosen for your investments. Its past history, record and performance of at least 5 previous years should be checked so that you do not feel cheated later.

When you have selected the firm and made investments, do not relax, assuming that the firm is there to look after your valuable amount. No one cares for another’s wealth. Always keep a track of where your money is being invested, ask yourself: “is it justified?”, what are the probable chances of returns and even losses?, if any. This will maintain a pressure on the firm that you are active in your investments and they cannot think of anything wrong or unfair.

Make Your Own Mutual Fund Profit Calculations

The Stock market is run on calculations and future rates. If you are trained enough to calculate profits for yourself, do regular calculations and see where your money can double or treble itself quicker. If it is outside mutual funds investments, do not hesitate to get it removed from there. After all, it is your money and your sweet wish to do whatever you want with it.

These calculations can be done with the help of simple financial ratios and if you think that something would be better for your investment; do share it with the mutual fund firm people. In any way, it is mutual fund and hence, investing money with mutual sharing of thoughts is the best way to maximize on your profits.

There is not much difference in handling your investments alone or handing it over to some firm. It is dependent only upon your active participation, be it alone or in togetherness. Stock market losses are generally incurred as a result of bad mutual fund investment strategies. If this is the case, even mutual fund companies cannot help you. So you have to look after your own money with great care and track the market to devise ways to turn it into a yielding amount.