The search for good mutual funds starts with looking for good mutual fund companies (families) and some families are more friendly than others for average investors. They offer good investments to people who simply do not know where to invest. People are confused by all the sales rhetoric. We are therefore simplifying the areas in which to invest with investor-friendly companies.
I started following (and selling) this stuff in 1972 as a stockbroker, trying to figure out where to invest other people's money … trying to make only good investments for those who trusted me. Once I learned that funds were the answer to 90% of the needs, the question became: how to find good mutual funds? I am writing this in 2014 as a retired financial planner and would like to share something that I have learned over the years, so hold your breath.
Your idea of good investments or good mutual funds may be different from the idea of a sales representative, especially if that person earns money through commissions and other fees. Breathe easily. A financial planner who works for commissions can tell you where to invest and sell you good mutual funds. The problem is that he can not tell you where to invest in friendly businesses for investors … and make a living doing it.
A $ 20,000 investment in an equity fund can cost you $ 1,000 in advance, $ 400 a year in fees, and an additional $ 300 a year in additional fees if you invest through a mutual fund. planner. If you invest directly with a large NO-LOAD, investor-friendly company, you could in any case earn $ 200 a year or less.
Real mutual fund companies keep investor costs low. They are financially strong; and offer a wide range of investments with good performance. Good service is provided free of charge. Enter "no funds" into a search engine to find them. Names like Vanguard, Fidelity and T Rowe Price will appear. They all offer medium-sized investors good low-cost investments. The three answers above meet our criteria – and the first two are the largest companies in the industry.
Good mutual funds are not expensive and you do not get what you pay when you pay high fees. In fact, these extra costs drain money from your account and hurt you. The net result is a lower return on investment. I do not call it friendly for investors. When the investment costs are high, this is not the place where to invest your money.
Now, once you have opened an account with one of the friendly companies, you may be faced with a list of more than 100 possible choices. Now the question of where to invest is becoming more precise. How do you find good mutual funds in which to invest? The general categories are equities (stocks), bonds, money market and balanced funds (the latter being a combination of the other three). What you need to understand is that even good mutual funds in the stock class can lose money in 2014 and / or in 2015. If the stock market falls, these funds in general will not be good investments. In addition, if interest rates rise, bond funds will not be good investments. More than anything else, it is the markets that determine whether investors earn or lose money. On the other hand, good mutual funds tend to outperform others over the long term.
With the current low interest rates, money market funds do not seem to be good investments because they pay almost nothing in interest. But that 's where you want to invest the money you want to keep safe. If rates rise, money market rates will follow. Balanced funds will lose if stocks and / or bonds suffer a lot. Do not be depressed. Invest in 2014 and 2015 with your eyes open.
In 2014, equity funds were very good investments for five consecutive years; and bond funds were good mutual funds in which to invest for more than 30 years. In 2014 and beyond, things could become difficult. Focus more on strategy than on selecting good investments in each fund category. Have money in a money market fund waiting for future opportunities when the dust settles. Spread your money in the four fund categories, because no one really knows where to invest in times of uncertainty.
As 2014 and 2015 unfold, remember that stocks and bonds have their ups and downs. In the long run, the funds have been good investments for tens of millions of people, whether in good times or in the worst. Do not forget that good mutual funds come from good mutual fund companies … and that's where you invest your money.