How do I invest in mutual funds?

Question

I want to start investing... with a small initial investment, and at a very low risk. I prefer to do it online rather than driving somewhere. How/where do I start?

I guess I wasn't specific enough... I am talking Investing 101. How do I find a broker or adviser? How do I know which funds to invest in?

Answer 1

almost all mutual funds have web sites you can go to and print out the applications. You fill out the application and send them a check and you are in business. You can redeem you shares over the phone. They will send you a check.

Now for the bad part. There are good mutual funds and not so good mutual funds. 70% of mutual funds under perform the market in general. The main reasons are 2. 1. Some have high expenses which eats greatly into returns. 2. Some churn their holding remorselessly buying and selling repeatedly. At the end of the year they are required by law to pay out all gains, which are then treated as capital gains and you must pay taxes on them.

So what you want to do is find the other 30% that have good returns historically, do not churn their holdings, and do not have high expense ratios.

There is one in particular that I think meets these criteria, or at least in the past it has met these criteria. Bruce Fund. You will find them on the internet. There are certain states that they do not sell their fund in.

Well thought of families of funds are Vanguard, Fidelity, T Rowe Price, Royce, Franklin Templeton and American Funds.

There are also funds called closed end funds that sell like stocks. Some of these closed end funds are index funds that have very low expense ratios and very infrequently sell their holdings so there are very few capital gains to be concerned about. These have become very popular in recent years, because of the fact that 70% of mutual funds perform worse than the market averages. So if you can't beat them, join them has become the philosophy. One very popular fund is SPDR 500 trading under the symbol SPY. Its expense ratio is only 0.10%. It has more than $52 billion in assets and mirrors the S&P500. It pays an annual dividend of about 1.7%. When you buy one share of this fund you are purchasing holdings in most of the S&P 500 stocks.

However, to purchase these you will need to open a brokerage account. There are several to choose from. Among the least expensive are Scott Trade at $7.00 a transaction, TD Ameritrade at $10.00 a transaction and ShareBuilder at as little as $4.00 a transaction.

Now let's talk about risk. There is no such thing as "very low risk" when you purchase stocks and bonds. They all have risk, granted some more than others but nevertheless they are all risky. If the U S economy tanks, which it may very well do, you can expect mutual funds to loose a significant value. In 2000-2001, SPY lost 20% of its value. It has not recovered yet, six years later. That should be sufficient warning.

Answer 2

best way is to research the fund u are interested in and the either:
1. See a broker & invest or
2. See if that fund has a direct method (like D.R.I.P. stocks).

Then, invest in the fund or funds on a regular basis.

Online or otherwise, look for a broker who has both online and physical presense.. Do not invest via online if the online broker is not one of the top ones...and good.

Answer 3

Go to the web site for T. Rowe Price. They have good mutual funds, good returns. There is always some risk associated with any investment except money market funds which are guarunteed. The lower the risk, the lower the return.

Answer 4

I recommend you consult with a financial adviser who is familiar with the market and who knows which stocks are safest to invest in. I signed on with American Express a few years ago, and my adviser has been responsible for guiding my investments to the point that they have more than tripled. I made it clear I needed safe investments, so the amount of money I make is less, but my investments are protected. If you are un familiar with the workings of the market in general and of mutual funds in particular, you need a financial adviser. The cost is minimal and is worth every penny!!

Good luck!!

Answer 5

I understand you want to invest 101 in whatever currency you want to invest. Many countries allow mutual funds especially capitalist countries such as USA, UK etc. In these developed countries, the funds have websites with online payment facility. Depending on the schemes, the minimum amount of investment is prescribed.

The mutal funds have various schemes such as schemes invest in equities, debt instruments, gilts etc. Basically schemes having exposure in equities considered high risk however these schemes provide high returns too depending on market movements.

If you are in low risk category, you may invest in a mutual fund scheme that invests in gilts or debt instruments. There are many debt schemes from many mutual fund companies.

Many online broking companies or association of mutual funds provide online updates of each scheme. You may go thru' the past performance of these schemes on your own or take help of your financial advisor.

Answer 6

Very carefully.

Answer 7

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