How Long Do Mutual Funds Make Money?

Question

This might be a bit of an odd question - but while researching funds, I see some that are at 15 dollars - and some that were once at 15, but are now at 90 dollars. Does that 90 then go to 300? And then that 300 to 1000? I hope this makes sense - I'm wondering how far can a fund go - and are there any clues to know that one is close to peaking (if that's even possible)?

M. "Are we having fund yet" Jones

Thanks for all of the responses - and believe it or not, it makes sense now. Now I understand why I don't see funds that have been around for a long time...but aren't 300 bucks a share. But it brought up a new one - wy are some funds closed?

Answer 1

Most mutual funds I have invested in don't have a large swing in the price per share. What they do to maintain and more even price is to take earnings and re-invest in more shares. So rather than the price per share going out of site, you just own more shares in that fund. More shares x the price = more profit. This way the price to get into the fund stays appealing.

How long they make money depends on the skill and strategy of the managers to invest in companies that generate a decent return balanced against the risk. Some mutual funds make very little profit others have a very good track record year after year. One thing to make sure of is the cost of management fees for that specific fund does not gouge the rate of return to the point that the only winners is the fund owners and not the investor.

Many funds are sector specific (have their investment strategy focused on a particular type of company). They make money when that sector of the market is in favor. It can be out of favor for many years.Other funds invest in more versatile or broad investments.

additional comments:

Some funds close to new investors because they cannot further extract the same returns out of a niche market. Having more capital invested will not yield a better return.... as a matter of fact the return could easily diminish to a point that it is no longer attractive to invest.

(Think of it like having a sub-compact car with a 10 gal gas tank...it gets pretty good mileage. The same might be true for the same car with a 30 gallon tank. A 300 gal tank would add 1,800 pounds of weight and now the gas mileage would absolutely stink yet the efficiency of the engine has not changed. It dies under its own weight.) Substitute dollars for gallons and it should make sense.

Some investment ideas will only support a certain level of investment capital and the rest would be in excess of need. That money not invested yielding a return or at lower money market rates bring down the value to the other investors so they cap the involvement by closing it. They may start a new fund to carry an investment strategy to another niche market as an alternative.

Answer 2

Well, they make money in more ways than one. First off is the value of the mutual fund share. If the share price goes up and you sell, then you have made a profit. Also, mutual funds pay dividends as well.

The value of the shares will go up and down over time and it may not pay dividends every single year. Something else that may happen is a split. The mutual fund shares are increased. If it is a 2:1 split and you have 50 shares at $80 then you would end up with 100 shares at $40. This keeps the price low so that more investors can afford to invest. If the shares were $1000 apiece then very few investors would be able to put their money in. This is not something that mutual fund managers want. They want many investors.

Answer 3

An (actively managed) mutual fund has employed managers making buy and sell decisions everyday. So, in theory, the fund continues to go up as long as it is in existence. Note though, it may face occasional dips in the meantime, but in the long run, if the managers of the fund are good, it will keep going up since there will always be new stocks to invest in.

Answer 4

A good mutual fund will make money forever and ever. It can make money for you, your children and then your grandchildren. The dollar price of a mutual fund share is not a focus. The focus is on how long you hold it and add to it. The focus is on how will you instill in your children to keep it and pass it onto their children. A mutual fund is like a diamond. FOREVER!

Answer 5

How Long Do Mutual Funds Make Money?
As long as the manager uses good sense and as long as the "bear paw" doesn't hit it (referring to bear markets unless it deals with shorting stocks)
Why do funds close?
Standard politically correct answer: "The fund has grown beyond what our fund manager can handle efficiently"
Politically incorrect answer: "Our fund manager is f'ing up and we don't want to give ourselves a worse name" (though I can see the sense in what Rx is saying too)

Answer 6

i think of you're lacking some significant products of guidance. historic returns are no longer alerts of destiny returns. 5 to 10 years in the past the 5-10 3 hundred and sixty 5 days returns regarded lots extra suitable than the a million-3 3 hundred and sixty 5 days returns. The time you reside invested in a fund must be based upon the point (in basic terms right use) of the money and the investment physique of recommendations, no longer the historic returns of the fund or the needs of the administration corporation.

Answer 7

The way to evaluate mutual funds is not by share value but by total return. Mutual funds share values do not behave as stock prices do.