Where should I go to invest in equity index or no-load mutual funds?

Question

I am mad that I spent so much $ on Class A mutual funds and want to dump my brokerage firm and start investing the smart way. I have read that equity index funds and no-load mutual funds are the way to go, but I have no idea where to go or which funds to buy. I just want to put my money away in aggressive investments and let the money sit there and reinvest the dividends. I don't want to buy and sell stocks - I would rather put it in diversified funds and just let it grow. I have 30 years to retirement so I want to be as aggressive as possible. Seems like if I ask a financial "expert," they just want to sell you their own products. Is anyone out there a financial expert who can give me objective advice??? HELP! I have a couple of IRAs and about $200K in mutual funds right now. Thank you!!!

Answer 1

You should invest in a diversified mix of stocks, bonds, and money market funds. You want to buy a diversified portfolio of stocks as individual stocks are too risky. Most folks have a dificult time buying a properly balanced portfoilio of stocks on their own. They will misbalance their portfolio by buying all small stocks or all growth stocks, or some other misbalanced assortment of stocks. Unless you know what you are doing, it is best to buy mutual funds. I like Vanguard.com, other people like Fidelity, TIAA-CREF, and DFA. Buy no-load, low cost funds. If you are like most people you will invest part of your money aggressively in stock funds, and part conservatively in money market funds and bond funds. Vanguard.com has an on-line questionnaire which will give you an idea of how to do "Asset Allocation," determining how much to put in each type of fund.

If your company offers a 401K plan at work, try to invest the most you can. The money grows tax free, and some companies will match your contribution. Investing in a mutual fund IRA is also a good idea. If you have children, you may want to consider a 529 plan or other college savings plan that grows tax free.

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. However, there are many different opinions out there on what the best mutual funds are. Read the links below and form your own opinion.

If you have high-interest debt, like credit cards, it is best to pay this off first before trying most of the investment ideas above. You should also have 3-6 months of salary saved up as an emergency fund in a bank or money market fund before trying more risky investments.

Believing advice you get on Yahoo answers can be risky, so read these websites for further information.
Sources:

http://www.vanguard.com/VGApp/hnw/planningeducation
http://www.fool.com/school.htm
http://sec.gov/investor/pubs/assetallocation.htm
http://www.diehards.org/readsites.htm
http://finance.yahoo.com/education/begin_investing
http://finance.yahoo.com/funds/basics

Asset Allocation Calculators
(Determining how much to put in stocks and how much into bonds and money markets is a personal decision depending on your financial status. These Asset Allocation questionaires give you a rough idea how to do this. I like Vanguard best, but try some of the other sites as well.)
https://flagship.vanguard.com/VGApp/hnw/FundsInvQuestionnaire?cbdInitTransUrl=https%3A//flagship.vanguard.com/VGApp/hnw/planningeducation/education
https://ais2.tiaa-cref.org/cgi-bin/WebObjects.exe/DTAssetAlcEval
http://www.ifa.com/SurveyNET/index.aspx

Web forum: http://www.diehards.org/
(Many investment web forums are overrun by scam artists. This one seems the most legitimate site.)


529 plans: http://www.savingforcollege.com

Answer 2

Hello Mrs B,

There are many good no load mutual fund companies such as Vanguard, T. Rowe Price, Fidelity, Dodge & Cox, Royce and Metropolitan West. No one mutual fund company is the best at all investment strategies. T. Rowe Price is very good at domestic equity strategies while Royce specializes in smaller cap value investments. For fixed-income, Vanguard, Metropolitan West, Fidelity and T. Rowe Price are all very good. For index mutual funds, Vanguard is probably the best and Fidelity also has some good low cost index funds.

If you are going to invest on your own without the help of a financial or investment advisor, you will need to do your homework. Some of the factors that I look when evaluating mutual funds are historical mutual fund performance, expenses, consistency and especially the quality of management. I am very selective when it comes to mutual fund manager and analyst backgrounds and experience. You do not necessarily have to pay any more for a highly qualified mutual fund manager, so why not select mutual fund managers with the best credentials.

I hope this helps.

Michael A. Weiss, CFA
The Editor
The Mutual Fund Investor
http://www.mutualfundinvestor.net

Answer 3

Yep. I am not a fan of financial advisors.

I also am not a financial advisor, so the following is at your own risk. however, I have averaged 18% returns for 10 years, and 24% returns for 5, and 40% last year. So, I am doing something right or just darn lucky.

The first thing is to learn how to read financial statements and prospectus.

When you buy a fund, there is absolutely no reason to not get a no-load, low fee fund. There are thousands and there is no fund with a load that is worth the load. While you mentioned load, also pay attention to expenses and 12b1 fees as those can eat away at your profits.

Here are some funds I like and why:
JSVAX - it is a no load fund with low fees. It also is a Morningstar 5 star large blend fund. The manager has been at the fund for 15 years and head of the fund for 7. It takes little to buy into the fund. Its aim is long term growth. Five year return is over 20%.
VTSMX - it is also a no load, low fee fund with a four star rating. It is an index fund and has done 13% average for 5 years. It is a good overal index fund.
OAKBX - this fund was rated number one by Consumer Reports and I have had it for many years. It has a low beta (the amount of fluxuation) and solid returns; 12% over five years. It is safe and not too risky. I have my grandparents in this fund.

I also like ETFs (Exchange traded funds). These are a pool of stocks, often in a foriegn country or catagory. I am big on China and Asia right now (but that could and will change quickly with any economic problems in the region). I have had great success with EEM. This year alone, since I bought it, it has risen over 30%. Latin America is hot too right now and ILF has proven very profitable for me.

The funds are safer, but ETFs are where you can make money quickly without beeing TOO risky. ETFs do have a lot more risk.

I would not invest in a commodidty ETF.

I use Scottrade since they are low fee and have offices everywhere. Good service too.

Good luck... remember, ultimately, your money decisions belong to YOU!

Answer 4

Fidelity Equity Growth Fund, if you want a buy-and-hold strategy. Sort of a set-it-and-forget-it way of investing.
If you want to have your money work for you, but have a higher maintenance fee, Look into some Asset Allocation Funds. Fund managers will follow current market trends and put your money where it needs to be. If you're looking to be aggressive, you stand the chance of losing quite a bit in a market turndown. With the Asset Allocation Funds, there's always someone there watching over your money and strategy.

Answer 5

Seems like you are looking for a "buy and forget" mutual fund. You want to be aggressive now, but as you near retirement, you very well may change your mind and become more conservative. The Asset Allocation funds and others suggested above do not automatically change to be more conservative as you get older. Only a "Target Retirement" type fund will do that. Check with www.troweprice.com (they use actively managed funds) or www.vanguard.com (they use their index funds) for 2 of my favorite places to buy a target retirement fund. Their phone reps will be glad to help you buy a fund.
Also, it might be a good idea to read the book "Mutual Funds for Dummies" by Eric Tyson. Its a good beginner book.

Answer 6

your best bets are through vanguard, fidelity, or t rowe price. all three of these offer excellent choices with the lowest costs...vanguard is my personal favorite with the lowest costs of all three