How To Learn About Investing With Mutual Funds
The right selection of mutual funds is essential to enjoy the fruits of successful investing
. You must be clear with your goals of investing.
Our immediate emotional response would be to move to the sidelines - a cash or money market account. We can rationalize that it is better to not make anything than to see a loss. However, that is a form of market timing, and it does not work for long term investing. Most investors miss the biggest opportunities while sitting in a money market account. Today, we will look at five of the most common criteria advisors use to evaluate mutual funds. Using these criteria individually can be helpful in maintaining a better quality investment portfolio. Performance alone is not something to consider.
Growth and income funds are the right ones if your goal is to create income and you can handle risks ranging from moderate to high. There are good chances of dividends and return on capital. If income is not your area of concern then fixed income mutual funds would be the right funds to invest. Equity income funds are another good choice. The fund manager is also the one taking responsibility for selling and buying different securities. The mutual funds falls under different laws and regulations, in the USA the IRS and SEC are over viewing the different funds.
As these instruments are are considered for long-term investments, you should be clear and knowledgeable about the market segment of your investment company. Examine in what economic segment or industry is the money being invested and what are future prospects of that industry.
Performance doesn't mean much if a manager is new. We cannot give much consideration to a fund's 10-year performance record if the manager has only been working with the fund for two or three years. That would mean that the majority of the fund's history is attributable to another manager. Funds with new managers need to be monitored carefully. Sometimes they are replacing a manager with a bad track record. Other times, managers retire or decide to move on to other opportunities. Nevertheless, it will take awhile to get a good idea of whether or not the new manager will be a valuable addition to the fund.
If you are looking forward to being a long-term investor and growing your capital, the aggressive growth fund would be the right one for you. These have high potential of return on capital but equally high chances of risk. If you cannot afford the high risk factor but are interested in adding to your capital growth then either growth, international and sector mutual funds would be the top ones for you. Growth and income funds are the right ones if your goal is to create income and you can handle risks ranging from moderate to high. There are good chances of dividends and return on capital.
This person is paid an annual fee that is a small percentage of your invest pool. This fee usually ranges from one to two percent. Here the motivation for the investment advisor is help you grow your investment larger, thus he gets a larger fee. It is a good situation for you and the advisor.
by: Arthur McCain
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