…Any picks?
I think I’m looking for no-load index . I have been paying attention to MorningStar rating and looking at risks, etc. I am a beginner at all of this, so probably picks with low risk would be applicable.

 

  • Dewayne 5:01 pm on February 24, 2010

    The way you phrase your question tells me you really arena’t sure what kind of mutual fund you want. The first thing you need to do is a risk profile. I advise you do two or three of them as each is worded differently and will allow you to fine tune your risk profile. I have found that some people, doing just one risk profile,will try to control the profile to fit what they think their risk tolerance is rather than letting the profile tell them. You can find risk profiles at your banks investment side as well as the internet or a mutual fund company. Once you understand what risk you can tolerate, the better your chances of success. You need to remember, investing in the market is a long term strategy, and you can’t be buying and selling your shares each time the market moves opposite the way you want.

    Don’t just rely on Morningstar ratings to make your decisions. It is a good place to start, but remember, if these guy are so good at rating funds and picking winners, they should have all bought the funds and be retired by now. The reason they arena’t retired is, it is impossible to determine which funds will be winners and losers over the long term. Historical performance of the fund is no guarantee of future performance. Using Morningstar is a good way to look at how funds have performed. The Morningstar star ratings should only be used to guide you to the better funds. You still need to do the research to determine if the fund is right for you. There is a software system available that uses Morningstar data. It is called the Steele Mutual fund Expert. It is a great way to look at all the funds available, with data, performance, and expenses all in one place. Peter Lynch, former manager for Fidelity’s Magellan Fund, in his books, "One Up on Wall Street" and "Beating the Street," used to visit the company, talk to the CEO, and actually tour the facility to see exactly what was going on there. This is tough, time consuming, and expensive for an individual investor to do, but you can see how doing research, or having a good fund manager can lead you in the right direction. John C. Bogle has a couple of great books that can give you great insight into the markets and mutual funds. "Common Sense on Mutual Funds," and "The Battle for the Soul of Capitalism," gives you an excellent look at mutual funds and how they work.

    There are a number of index’s out there. There is the S&P 500 with 500 selected companies. There is the Russell 1000, the Russell 2000, and the Russell 3000 which is the Russell 1000 plus the Russell 2000. There is the Wilshire 5000 and the Wilshire 4500 which is the Wilshire 5000 minus the S&P 500. Each of these index’s make up a certain percentage of the market, so it just depends on how many positions you want. Most people buy funds tied to the S&P 500 index.

    One of the main reasons people invest in index funds is they offer diversification and low fees. Fees are low because Index funds usually don’t have money managers. Their performance is tied to the index. But those funds won’t exactly match the performance of the index because even the no load funds do have 12b-1 fees. Remember, the fund has to make money too. It is a business.

    Lets take a small look at the market to see how it is easier to lose money than make money. From 1995 to 2005 the market returned 11.50 percent. From 2000 to 2005, the market returned 0.15%. People lost money because they panicked. They saw a big drop in the market and sold. So most were’t in the market in 2003 when the average from 2003 to 2005 was 17.32%. They were’t in the market to recover the loss. This is why it is important to know your risk profile so you don’t bail when the going gets tough.

    You need to be sure your portfolio is diversified. Unless you have a good liquid cash position, investing in index funds might not turn out the way you want it to. You need liquidity. If you have a cash emergency, you don’t want to be selling mutual fund shares to get the cash. This defeats the purpose of having index mutual funds. I recommend to my clients they have 50% of their annual income in fixed savings accounts before moving to equity based investing. I have my clients put 15% of their income each year into Money Market savings accounts and other fixed accounts until they have reached the 50% level. If you can’t put 15% away each year, put as much as possible and then work up to 15%. Once you have 50%, start moving the overflow into the equity accounts. You want to have a strong fixed position during this up and down market, so you are less likely to feel you need to bail out.

    Finding something with low risk is really not what you are looking for. You are looking for funds with risks you can tolerate based on your risk profile. For example, who would have thought 5 years ago there was a great risk in losing the equity in your home. Yet the mortgage mess has wiped out

  • Hettie 5:01 pm on February 24, 2010

    First the disclosure–I’m not a financial advisor in any way, I have no affiliation with any brokerage, financial institution, etc–just a plain person, in other words!

    I would recommend that you investigate Vanguard Funds (http://www.vanguard.comThe main reason is Vanguard funds historically have the lowest costs associated with them–in fact, according to their website (and yes, I know, but this is validated by many other sources):
    The average
    mutual fund charges six times as much as
    Vanguard does.* The difference can add
    up over time. * Source: Lipper Inc. as of 12/31/2007. Certainly you can confirm costs on Morningstar–it’s a great resource! You can research the various index funds that Vanguard offers and decide which suits your investment style. I know index funds are considered boring but over time, they’ve historically proven to do as well as most managed funds, so the cost you pay the broker seems to me to be the overwhelming deciding factor as to which fund(s) to purchase. Also, you might consider a mix of US and non-US Vanguard Index funds–e.g., VTSMX (Total Stock Market Index Fund) with an expense ratio of 0.15% and VGTSX (Total International Stock Index Fund) whose expense ratio is only slightly higher at 0.27%.

    On the Vanguard website, you can research the various stock fund offerings and find out their expense ratio and compare it to the industry average. I’m sure you could also do this on Morningstar.

    You may want to also consider a bond index fund to pair with your stock fund; Vanguard’s Total Bond Market Index Fund (VBMFX) has an expense ratio of 0.19% compared with the industry average of 1.05%!

    Seems to me this is an excellent time to invest in the stock market–sure, it’ll probably go lower but over time, I have confidence that it will return to health.

  • spark 5:01 pm on February 24, 2010

    I see the US dollar cont. to be weak in the next 4 years, especially if Obama becomes president. Taxes will be increased to some degree in the next eight years no matter who is president due to the huge deficit. The world war on radical islam will continue. It may slow down if Obama becomes President, but it will not cease. This will continue to interupt oil supplies. India and china will contiue to expand their demand for oil in the decreasing overall world supply. Note that 50% of all known oil reserves have been used.

    Move your money off shore and into euros.

  • Rowena 5:01 pm on February 24, 2010

    You should be able to find a no load fund. Make sure it has low expenses, as that takes a piece of your pie too. The S&P 500 fund is the base fund that most people work from. The only disadvantage to it is that it emphasises U.S. based securities, so a weakening dollar and economy here has a really bad effect on the fund. You should put some into a diverse international fund also.

    Good luck.

  • derobake 5:01 pm on February 24, 2010

    Vanguard and Fidelity offer low-cost index mutual funds sold without a load or 12b-1 fees. When choosing a fund, pay attention to the assets it invest in and its costs. Past performance is of very little value in choosing a fund. Morning star ratings (based mostly on past performance) are not a good indicator of a "good" fund.

    Risk is a tricky term. It depends on your time horizon. It depends on your frame of reference. To most people, risk equals price volatility. However, don’t forget the long-term risks of inflation and running out of money before you die. The true enemy of the long-term investor is inflation, not a bear market. Check out my free e-book for more information. http://www.invest-for-retirement.com