I want to invest in a mutual fund. How do I get started?

Question

I have my 2006 Christmas bonus sitting in my savings account; I want to watch my money grow-I'm an amateur at this. Need advice, referrals and guidance!

Answer 1

The best mutual funds to buy are no-load, low expense funds. I like Vanguard.com, other people like Fidelity, TIAA-CREF, and DFA. If you are like most people you will invest part of your money conservatively, in money market funds and bond funds, and part aggressively in stock funds. Vanguard.com has an on-line questionnaire which will give you an idea how aggressive you want to be.

I like index funds. Because of their broad diversification, you are less likely to have a dramatic drop in value. They also have the lowest expenses. For stock funds, I would suggest putting ~70-80% of your money in the Vanguard Total Stock Market Index Fund. and ~20-30% in a foreign stock index fund.

Investing in a mutual fund IRA for retirement may give you an income tax break. Talk to your tax adviser. You may also be able to invest in a mutual fund via a 401K plan at work.

Believing advice you get on Yahoo answers can be risky, so read these websites for further information. If you find it too confusing, contact a professional financial advisor. They will charge you significant commissions, however.

http://www.vanguard.com/VGApp/hnw/planningeducation
http://finance.yahoo.com/funds
http://www.dallasnews.com/sharedcontent/dws/bus/scottburns/columns/2007/vitindex.html
http://www.fool.com/school.htm
http://sec.gov/investor/pubs/assetallocation.htm
https://flagship.vanguard.com/VGApp/hnw/FundsInvQuestionnaire?cbdInitTransUrl=https%3A//flagship.vanguard.com/VGApp/hnw/planningeducation/education

Answer 2

Congrats on your first investment! First off, stay away from places like morningstar, etc., mainly because they only tell you which funds were good LAST year, which, of course, has nothing to do with which investments will be good this year, or next year... To begin your investment experience, I would do the following: 1. Speak with a professional - there are many resources here; bank financial advisor, call fidelity, go to an Edward Jones office... 2. Determine how much risk you are willing to take with this money - the stock market is volatile, and you can lose your money! 3. Invest in something that is moderately conservative, like a "Balanced Fund" that has both stocks and bonds in it... good place to start... Best of luck to you.

Answer 3

Try businessweek.com (or morningstar.com) and go to the investing page, then click on their mutual fund score card. Or click on the article with the funny title, the "Weird World of ETFs" (exchange traded funds), which gives some ideas worth looking at. For that matter, Ishares.com has some really good stuff.

First, take a breath, relax, and remember nothing is perfect. Just because you find something with the biggest returns doesn't mean that they will stay that way. Some things to look at in the mutual fund tables is risk--I suspect your tolerance for risk may not be very high, so look for things like low or medium risk. Something to remember about risk is that low risk stuff tends to have low performance figures and high performance figures tend to go with high risk stuff and low performance figures can also include high risk stuff that failed. Again, take a breath, relax, and remember that nothing is perfect.

The idea is that if you invest in several good things, they might average out good. That is what mutual funds and exchange traded funds (ETFs) are for. Browse through them. When something strikes your interest or something seems as good as any but better than most or something suddenly makes good sense to you, dive in. An easy and non-embarrasing way to go is to buy diamonds (stock symbol DIA), which is an ETF that holds the Dow Jones Industrial stocks. When you hear the stock market news you will usually hear about this set of stocks first, followed by the Standard & Poors (or simply S&P) 500, for that you look up stock symbol SPY as an easy way to buy into it. This puts your money into the 30 best (commonly called blue chip) stocks in the Dow Jones average or the 500 best stocks in the S&P--all with one or two simple stock purchases. There is more, so take a breath, relax, and read (realizing that nothing is perfect). You'll do fine.

Answer 4

Probably the best thing for a beginner like you is to contact a good honest mutual fund manager like Vanguard and tell them you want to invest in a low cost S&P500 index tracking fund. This will be safe and will follow the fate of the US economy as a whole.

Alternatively, You can contact a financial advisor and go by his recommendations. But it will cost you a little and in the long run you will probably not do any better. In any case good luck in your first financial steps.

Answer 5

Try talking to the investment people at the bank, they should have answers for you. Do some research on what stocks you feel you want to invest in and talk it over with them.