Mutual funds: I have been considering buying a mutual fund. This is my first time doing so.?

Question

How do I know which one to buy? What do I look for? I don't know anything about this.

Answer 1

I have to take issue with one of the responses. The statement that 80% of mutual funds to not outperform the S&P 500 is not exactly true. First of all not all mutual funds attempt to outperform the S&P 500. There are thousands of mutual funds with hundreds of different objectives. One must take that into account when investing in mutual funds.

Another thing to consider is that the S&P 500 is a capitalization weighted index. The top 20 stocks in the index account for perhaps 35% of the value of the index and its performance has not been anything to brag about these past 6 years.

First. Decide what type of mutual funds you want to invest in.

Do you want a realatively safe mutual fund with maybe 8% annual peformance?

Do you want a fund that might possibly return 13%+ annual performance with the possibility that you may loose 1/2 its value along the way?

Do you want a real safe mutual fund with maybe 5% annual performance?

Do you want a mutual fund that invests in areas that are growing much more rapidly than the U S?

In my oppinion, it is a good policy to own several different mutual funds with differnt investment objectives. Maybe a large cap, maybe a small cap, maybe a mid cap, maybe a foreign developed markets, maybe one that Invests in China, maybe one that invest in Japan. Get the idea?

Of course it might be difficult to purchase such a variety all at once. A good approach would certainly be to start with a large cap such as an S&P 500 or one of that variety. Then with the next investment you make pick one with a different object.

Answer 2

80% of the mutual funds can't beat or end up equal to the SP500 over time. Most mutual funds now just track the SP500 while you pay them a percentage to do this and pay hidden tax (from people selling their shares, which don't show up on your statement but are taken out of your returns). Also some mutual funds have minimum requirements. Mutual fund companies have created mutual fund/stock hybrids called ETFs. One of the advantages is that although you have to pay a small fee (taken out of your return), you don't have to pay taxes from other sellers (so your ETF will probably beat a standard mutual fund tracking the exact same stocks). You should look into buying SPY (tracks the SP500) or DIA (the Dow Jones index).

Mutual funds can be bought by either the mutual fund company (operators are standing by) or by a stock broker. ETFs can be by an online stock broker or over the phone.

Answer 3

First of all, you invest in mutual funds or you buy shares of a mutual funds. It is not recommendable for people who don't know anything about MF to invest in them independently, cuz if your really lucky you'll break even. Go to you broker and make him earn his commission by explaining to you in detail what MF are all about. It takes 1 full college semester to understand MF

Answer 4

Make the choice based on when you expect to take the money out, what it's for, what your age is, etc.

go to www.fool.com and search on "mutual fund" for free & fairly fair advice.

Don't pay more than 1% expenses...

Invest an equal $ amount on a regular basis, rather than a lump sum all at once...

Pay NO attention to the market...

Get rich slowly!

Answer 5

try americanfunds.com and franklintempleton.com

check out the average rates of return.