Mutual funds?

Question

I was told that you can make a lot of money in mutual funds....Can someone please describe how mutual funds work and how Ishould go about getting one......thank you

Answer 1

Don't buy mutual funds. The problem is that they divide up your returns too much.

The way they're designed creates this problem. The mutual fund managers and employees all have to get paid, this cuts into your earnings. As a result, the fund itself becomes less attractive, so they pay advisers to recommend them, which further cuts into your earnings. But, advisers sing their praises (bc they get paid as long as you own the fund) telling you they help you diversify and protect you if an industry has a bad period. Mutual funds, by their design, add a middleman. With so many ppl saying "cut out the middleman!" why would you invest in mutual funds which, by their design, have a few?

Go direct with stocks. If you do your research and learn about the company and why it's a good one (if you can't answer why it's a good company, don't buy it) then you won't have much to worry about.

Answer 2

yould could but there are over 1000 different style of funds you could get. All have minimum requirements for investing (as low as $250 and as high as 1 million or more) some have front end loads back end loads (fees for buying or selling) others have no load (get these) some have an expense ratio of 2 or higher (try not to get these) some at 1.5 and a lot at 1 or lower (get these) . they work as a fund manager picks what he likes and if it is in the particular funds stragety then they will invest it. However you can only buy and sell it at the closing day prices (meaning at 4pm what ever the closing price is which is usually posted by 6pm that is the price you pay/sell it for). Mutual funds are not as voliatle (in many cases) as ETF's and i still have one mutual that i own but mainly in the etf game right now. Morningstar.com has one of the better sites regarding to mutual funds. Good luck but be smart

Answer 3

What is your definition of a lot of money? A good mutual fund will normally return about 10% to 13% annually over a long period of time. Some indeed to return 50% or more in one year, but most do not. You can buy most mutual funds directly from the mutual fund company. The one exception to that rule is closed end mutual funds which are purchased like stocks from a stock broker.

You can research mutual funds at Yahoo finance, at Forbes. Pay particular attention to the Morningstar rating. Look for funds that are rated at least 4 star and have low expense ratios.

There is a book you can get at your book store "Mutual funds for Dummies" It will help you greatly to read that book. Your library may also have it.

Here is a link to Yahoo mutual fund screener.

http://screen.yahoo.com/funds.html

Here is a link to a set of funds that should be good investments over the long term.

http://screen.yahoo.com/a?trfy=160%2F&mii=%2F2500&mfl=0&er=.01%2F.99&to=/30&rt=4/&s=nm&vw=1&db=funds&b=1

Answer 4

I went with mutual funds and lost.

Mutual funds work like this. A broker names a fund MUTUAL FUND AA. He will buy thousands of shares of certain funds. Then he has to sell to you to make money.

In this Fund AA there may be
1. Sewage Disposal company
2. Trucking Company
3. Company that makes...whatever
4. A well known company that looks good
5. An unknown company that is risky

You buy 100 shares of this Fund AA.

One week the trucking company loses 15 trucks so the stock is way down. 15 points

But the company that makes...whatever has a contract from China so your fund is up 10 points.

You're still in the hole for 5 points.

I don't recommend Funds. In fact I'd say keep out of stocks unless you have an expert advisor. Think real estate instead. If you've got 20K you can get a mortgage for a small house that you can rent out. Much safer than stocks.

Good luck!

Answer 5

Mutual funds are a low risk investment. You can make money steadily and slowly but it will never make you ALOT of money in a short time, like double or triple your investment amount. It is likely to give you sustain returns of 6%-10% yearly.
It's buying a basket of stocks and shares. So the ups and downs of any one company will not affect you in a major way because they are diversified.

Answer 6

they'll like stocks. u research and choose the right one and sell when it's up. There are more restrictions though, such as load (up front fee) and redemption fee for not holding the fund for a certain amount of time.

Answer 7

Your better off playing the lotto.