Your Questions About Investing In Mutual Funds

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John asks…

What is better investing in stocks or mutual funds?

Is it better to choose your stocks to invest in and invest in mutual funds? What are the costs or mutual funds? What are the pros and cons?

financi4 answers:

When you invest in an individual stock, you have a chance you hit a home run and make a lot of money because the company’s stock price goes through the roof. Of course it is also possible to buy an apparently good company which then goes to hell and you loose your entire investment (e.g. Enron, GM).

For most small investors it is better to buy a no load fund and your only expenses are for management and trading expenses, which could vary from 0.25% to about 2% per year. You can buy sector funds (specific industries) or an index fund, which simulates the entire market, the latter have generally the lowest expense ratios.

Joseph asks…

How much of a return will I get for investing 300 dollars a month in Mutual Funds for 20 years?

Investing. I’ve read and listen to this Dave Ramsey which is a Financial GOD so to speak. He said to invest into Mutual Funds is the best thing you can do. I’m not much of an investor but was wondering what kind of returns will I get?

financi4 answers:

Until your portfolio swells above a few hundred thousand, the most component is how much you save–not your rate of return.

Your rate of return can be stellar (above 10%) or less than desireable (less than 5%), but your ending portfolio value will not be affected that much by the return you get in the early years.

Once you accumulate several hundred thousand (there’s a mathematical number that you cross but I’ve forgotten it–it may be closer to a million) then your return starts to really matter much more than your contribution rate.

Regardless, in answer to your question, no one knows how much you’ll have. It depends on the funds you pick and how they perform. You could invest in stocks/funds your whole life only to have the market crash right before you retire. But if you put away $300/mo you will have a lot more money than if you never saved at all, regardless of your return!

William asks…

Where do I learn about investing in mutual funds?

Can you suggest some sources (books or online websites) where I will learn how to invest in mutual funds? If you suggest books, please suggest only those which are easily available in India.

financi4 answers:

Mutual Funds is basically two types:-

– Close Ended

– Open Ended

In Close ended a time period is open for investing or switching money.

But in open ended no time required for investing or switching money.

You are invest in money in mutual fund in one short. And second way which is very good way for investing money in mutual fund.

Open A SIP(Systematic Investment Plan) it is a very good idea for investing money in mutual fund.
In this you have invest monthly basis. You are started with your price….

Donald asks…

How are Vanguard Mutual Funds? Would investing in a Mutual Fund be wise given the economy?

And I have also heard some talk of this being a Double dip recession. How will that affect Mutual Funds?

financi4 answers:

Vanguard is one of the better fund companies, it enjoys a well earned reputation and has been in business for many years through good times and bad.

Without having more information about your personal information, such as age, current income and other data such as risk tolerance, martial status, and demographics it would be very inappropriate for me or any other responsible person to provide specific investment information in this type of media. And it would not be prudent for you to accept any specific investment advice from unknown individuals here at YA or a similar media.

There are many people just like you that are, or were looking to invest and those that did bought Mutual Funds and/or Exchange Traded Funds (ETFs). One purpose of mutual funds is to help investors like you, who are either just entering the investment world or who have no investing experience. Once you feel you at least have an understanding of investments you should look into ETFs which are similar to mutual funds but are traded on the exchanges.

Mutual Fund companies as well as ETFs have an entire array of products many will fit your needs. You can go to the MSN.Money website
http://moneycentral.msn.com/home.asp it has an entire section on mutual funds and Exchange Traded Funds. Read about the various products and in doing so you will be getting investment ideas and at the same time educating yourself about investing.

You could also contact the funds companies for more information. I have found that Vanguard & Fidelity can meet your needs for mutual funds. The service and information they provide is all free and you will find it helpful.

Regardless of what you decide, do not ever let anyone tell you not to invest, especially those that do not invest themselves. Good luck

Charles asks…

Should we invest in Mutual Funds investing in Soft Commodities or precious metails or energy related funds?

GILSON DCRUZ

financi4 answers:

Of the 3 choices my favorite would be energy related funds but at the moment oil prices are somewhat elevated so there would be some risk involved. The reason I like energy funds over the other two is that energy is continually being consumed and not replaced. In other words we are running out. Can’t be bad for a long term investment. Of course there is always the possibility that governments will seize the energy assets leaving we investors holding the so called bag.

Ken asks…

how do I start investing in mutual funds?

I don’t know which ones are good or where to start? A friend said I should start at a charles swab. Which ones are good, I’m 32 years old and don’t mind high risk right now.

One other question. Mutual funds are made up of several stocks now do these stocks ever change or are they always the same stocks?

financi4 answers:

I invest with Fidelity Investments. Look for mutual funds that have no sales load and minimal expense ratios. Typically 0.2 to 1.2%, depending upon the fund.

Also consider Vanguard and TD Waterhouse (or whatever their new name is). The stocks within any fund will vary. This is measured by the turnover ratio. Charles Schwab is also fine, as long as they do not charge you a commission.

A good place to start comparing funds is either http://finance.google.com or http://nytimes.com/business/ .

Consider funds with Morningstar ratings of 4 or 5 stars. Past performance is not always a good predictor of future performance. That is called chasing yields and is usually a poor investment strategy. Look for funds with consistently higher returns.

My favorite fund in Fidelity Contrafund FCNTX. Last year’s return was 18.6%. Although it is not the best performer in bull markets, it holds up extremely well in sideways and bear markets.

James asks…

WHICH IS BETTER Investing in MUTUAL FUNDS OR SHARES trading?

Please suggest me plan for yearly investment of 10000/- for say 10 years which will yield higher return?how much can i expect net return from investing in mutual funds by investing 10000/- per year for 10 years?
I am asking for plans,i mean which mutual fund scheme should i go for or should i go for unit linked insurance or pnsion plan and if yes then which company’s plan?

financi4 answers:

The higher the risk-the better the profit
the risk is higher in shares so is the profit,
even among the mutual fund,there is high risk fund and low risk fund like-
1.Equity schemes
2.Debt schemes
3.Balanced schemes
If you opt for long term,then don’t worry go for high risk fund or stock,but study their past performance before you jump in.

Richard asks…

What’s the most effective way to gain confidence in investing in mutual funds?

What’s the best mutual funds for a time like today?

financi4 answers:

There’s no reason not to have confidence in mutual funds. It’s just you and a bunch of other people ganging up in this fund to buy a bunch of stocks and bonds. Each fund buys different ones.

A good fund for basic investing is one that is well diversified, having many different types of stocks, bonds, etc. A good fund also has low expenses and no loads (commissions).

A good fund to start with is the Vanguard STAR fund. These are good investments for anytime, however you shouldn’t invest unless you plan on letting it sit there for several years.

David asks…

Has anybody lost money by investing in MUTUAL FUNDS?

If yes, then how? What are the precautions one must take while investing in Mutual Funds.

Is UNIT TRUST equally safe? What is the difference between Unit Trust and Mutual Funds?

financi4 answers:

Over the long-term, it is very difficult to lose money in mutual funds (unless you just buy ones that you should have KNOWN were a bad idea! “We promise 50% return every year!”, etc.)

When you buy a single stock, you are betting that particular company will continue to succeed; if you buy a typical mutual fund, they “pool” your cash with others and buy stock in sometimes THOUSANDS of different companies, thus diluting the impact of any particular company failing. Most funds are “managed” and have supposedly smart people deciding what to buy and sell and when to do so.

Unit Trusts are a similar concept to mutual funds, except they have already made the decision on when they will sell a particular company’s shares before they buy it.

If you invest for the long-term, and buy reputable funds or UITs that invest in a broad market, it’s hard not make 10% a year on average, which means your money will double every 7.2 years…

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