Income Mutual Funds - What to Do With Your Under Performing Mutual Funds For 2010 and Beyond

Investing in mutual funds for income is not a good investment; it holds too many variables and uncertainty. For one thing they are very illiquid, they are very expensive to manage and because the percentage of mutual funds that loses money is so high, it makes it very likely that you will lose money if you invest in it for a short period. Thus trying to earn a weekly or monthly income from mutual funds is almost impossible. Yes it can be done if you have a really huge portfolio of $10million or more.

Today I am going to show you the proper way to invest in mutual funds to build yourself a financial empire for your grand children. Notice that I said grand children, because mutual funds are for long term investment, the longer you invest, the better your chance of making a decent return. Note that if you find a solid company to invest into for the same period as the mutual fund. Your return will almost always out perform any mutual funds. Consider this as well, the risk will also be much greater than the mutual fund investment.

Over the coming weeks and months I will be writing as series of articles on topics such as:

ETFs, Stocks, Bonds -commercial, Income Trust, REITs, Virtual Banks Company Drip programs and Profit sharing and much more.

Since 99% of mutual fund loses money. If you invest for 50 years, you may lose money for 35 years, (having negative returns). In the other 15 years you might make a profit, some years you will do extremely well. The 15 years that you make money will average out and hopefully give you are turn of let us say 8% to 15% if you are luckily.

The best way to invest in mutual funds is to buy the fund that tracks the stock market; statistics shows that the stock market will always go up. If you buy this fund it will always go up too.

These funds are call index funds You can find some mutual fund companies that charges as little as 0.18% to manage their index funds, that is about $1.80 for every $1000. Invested. That compares to the industry standard of 3-6.7% or higher, (that is $67. For every $1000 invested). This is how I recommend you invest in index funds. You should have 75% to 80% of your savings invested in index funds, because we know that they will do as good as the stock market does over time.

Even if the stock market fall off a cliff, it always comes back right? Now if you remember reading in one of my recent article "Dirty Secrets of the Mutual Fund Industry" I told you to diversify both by sector and percentage. These companies has all the right index funds, that allows you to do that, You put 15%-20 % of your money into the US large cap index funds, 15%-20% into US small cap, index funds, 15% -20% into emerging markets index funds, 15% into Asia pacific, 15-20% into euro index fund and 10 to 15% into the mining and natural resources and 10- 15% into precious metals.

Let me make a disclaimer here: I am not recommending any mutual fund company nor am I getting any compensation for telling you about index funds. Also i am not giving personal financial advice in anyway; I am just stating my own opinion. You should always seek proper financial advice before you invest.

By investing this way you are covered across all the sectors and because you are in the index funds, you are not spread too thin. To manage your investment you can spend about 1 hour every 6 months or even once per year to adjust them. When you are doing your adjustment, take a look at what is under performing and adjust that to give a bigger portion to the over performer. Money will grow over time, that is the law of compounding interest.

In 1965 a couple gave $25,000 to a young investor to invest for them. In 1998 when the wife pass away, her investment was worth $750million. That is the power of compounding interest working; In just 33 years of 22% annual return, turn $25thousand into $750million.

By just earning 1% per day you could turn $2000 into $1 million in just about 2 year, visit. http://www.incomemutualfunds.info to learn how it is done

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Your Best Mutual Fund Investment Guide If Clueless

If you feel clueless this mutual fund investment guide is written for you. It may not be the best mutual fund investment guide ever written, but it could be the simplest. Where's your money? Chances are you already have an investment in funds, or will some time in the future.

Mutual funds are the easiest way in the world to invest in stocks and bonds. And stocks and bonds are the building blocks of any investment portfolio, whether large or small. The giant insurance companies and pension funds manage their own stocks and bonds. Most individual investors rely on fund companies to do the management for them. If you invest with the best mutual fund investment companies, you get good service and the cost of investing is minimal.

When you make an investment in mutual funds you simply invest a dollar amount. The fund company then issues you shares based on the price of the fund's shares upon receipt of your money. Then they invest your money along with that of their other investors. Equity funds (stock funds) invest your money in stocks. Bond funds invest in bonds; and balanced funds invest in both stocks and bonds. The value of these shares will fluctuate. Hence the value of your investment will go up and down as you hold it.

There is one exception to the above statement. The fourth major category of mutual funds is money market funds. The value of their shares is stable, at $1 a share. These are the safest funds, and they simply pay interest in the form of dividends. Funds that invest in stocks and/or bonds usually pay dividends as well. You can receive these dividends, or simply tell the fund company to reinvest your dividends to purchase more fund shares. The latter is automatically assumed if you hold mutual funds in an IRA or 401k.

Very simply, you just pick the funds to invest in and send in money. Whether in your 401k, IRA, or an account you open with a financial planner or on your own with a no-load fund company... you invest your money with them and they do the rest. You will also receive periodic statements that show you what you own and the value of any mutual funds you have with them.

Don't avoid mutual funds. They are the best investment for most people most of the time. These funds are also the investment options available in most 401k plans. You need to invest in stocks and bonds to put your money to work. Otherwise, you're stuck with money safely tucked away someplace making peanuts in the form of interest. When you think of stocks and bonds, think stock funds and bond funds.

We wrap up our fund investment guide with one of life's realities. Investment companies (mutual funds) do not work for free. The best mutual fund investment companies keep the cost of investing low, and most funds are reasonable in the cost department. If you want to invest on your own and keep the costs low, open an account with a no-load fund company. Your best mutual fund investment is often a low-cost fund with either of the following reputable fund companies: Vanguard or Fidelity. These two also happen to be the two largest investment companies in the fund business. Check them out on the internet, and call for free information.

If you explain that you have money to invest and want to learn more about their mutual funds, you'll get a nice package in the mail a few days later. Study the material, and you won't feel so clueless anymore. Good luck and I hope this basic investment guide has been helpful.

A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.

Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com.

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What is a Mutual Fund

A mutual fund is an investment company that pools together the money of its shareholders, and invests it in a variety of stocks, bonds or money market instruments. Mutual fund is usually managed by a professional fund manager, who is responsible for making investment decisions. By owning a share of a mutual fund an investor automatically owns all the shares the fund owns.

Over the years, mutual funds have become very popular amongst the investment public. Billions of dollars have flowed into mutual funds and they continue to expand. Two benefits of investing in mutual funds that make them so popular are, the ability of investors to automatically diversify their investments by buying shares of the fund and the professional management provided by the funds managers. These benefits make investing in funds especially appealing to novice investors.

Potential investors looking to invest in mutual funds will be faced with a wide variety of choices to pick from. There literally exists, a fund to match any type of investment objective out there. From growth to income to bonds and even "green" funds - funds that only invest in environmentally friendly companies, the number of funds available continues to expand every year.

To own a mutual fund, all a potential investor has to do is buy a share of the fund. The price of the share, termed its Net asset value (NAV), is determined by dividing the total market value of the funds investments by the total number of the funds shares outstanding. The Net asset value is calculated daily. Most mutual funds require you to make a minimum initial purchase. Funds can be purchased from a broker or from the mutual fund company itself. In order to cash in on a profit from a rise in share price or dispose of shares, an investor simply sells his fund shares back to the mutual fund.

An expense a potential mutual fund investor might have to deal with is the sales charge, called the load. Some funds require you to pay a load fee when you buy into them while others don't. Funds that require you to pay the fee are called Load mutual funds, while those that don't charge a sales fee are called No-load mutual funds. Studies have shown that there is no difference in performance between No-load and load funds. Another expense investors have to be aware of is the management fee charged by fund managers to manage the funds. It is usually a percentage of the total assets under management and varies from fund to fund. These expenses can add up quickly and investors should pay special attention to this.

Mutual funds continue to be a very popular investment vehicle and will probably continue to be so for the foreseeable future.

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A Small List of Mutual Funds

In the investment market, you can find a list of mutual funds to choose from. There are various investors in the market with varied needs, objectives and risk profiles. So, one fund cannot satisfy all the preferences of the investors.

Classification of Mutual Funds

Normally, an MF is classified into two broad categories:

-On the basis of execution and operation
-On the basis of yield and investment pattern

The list of mutual funds based on execution and operation are:

-Open-ended Fund - In this scheme, the corpus and time of the fund is not prefixed. You can purchase and sell any number of units at any time. The main features of these funds are flexibility, instant liquidity, not traded publicly through any exchanges, ability to repurchase and resell and so on. The main purpose is income generation and their prices are associated to Net Asset Value (NAV) of the units.
-Close-ended Fund - In this scheme, the corpus and duration of the fund is pre-determined. The fund expires when the subscription reaches the fixed target. The main purpose is capital appreciation. Since these are traded on stock exchanges, any market trend (both favorable and unfavorable) affects the performance of the fund.

The list of mutual funds based on yield and investment pattern are:

-Income Fund - The main objective of this scheme is to generate and distribute income to the investors periodically. The income generated is usually higher than that from bank deposits. The investment pattern is usually oriented towards high and fixed income generating securities. This is the best option for retired people.
-Growth Fund - These funds concentrate in generating long term capital appreciation and do not provide any regular income. They are also referred to as 'Nest Eggs' funds. The investment strategy is oriented towards equities which have high risk tolerance and high growth potential. This is best suitable if you are salaried or if you are a business person.
-Balanced Fund - These funds are a combination of income and growth mutual funds. They are also known as 'income-cum-growth' funds. They mainly concentrate in allocating regular income along with capital gains. The investment pattern is generally balanced between securities providing high growth and fixed income.
-Specialized Fund - These funds are oriented towards the special needs of specific categories of people. This fund allows foreign investors to invest in domestic securities of other countries. They are usually confined to a particular sector or industry. These funds are highly risky and serve as a good option for high risk takers.
-Money Market Mutual Fund (MMMF) - These are similar to open-ended mutual funds and have all the features of an open-ended fund. But, the investment strategy varies as these are invested in money market instruments like treasury bills, commercial paper and the like.
-Taxation Fund - This fund is essentially a growth fund. The only difference is that it offers tax rebates to the investors. This is the most suited choice if you are a salaried person as you can enjoy tax discounts.

Few Other Classifications of Mutual Funds

Apart from the above-mentioned classification, there is another list of mutual funds. They are as follows:

-Leveraged Fund - Also referred as 'borrowed funds'. They are mainly used to raise the value size of a fund portfolio.
-Dual Fund - These are a special form of close-ended fund. They give two different kinds of investors an opportunity to make a single investment.
-Index Fund - In this fund, the portfolios are designed in such a way that they move in accordance with the market index.
-Bond Fund - These are income generating funds. The portfolio mainly consists of securities like bonds which have the capacity to generate fixed income.
-Aggressive Growth Fund - These funds are more focused on capital gains. They are highly volatile and are usually invested in securities that are highly speculative.
-Off-Shore Fund - These funds are designed for non-residential investors. These funds are registered in foreign countries. They contain country and currency risk but the returns are high.

So, the decision to invest in mutual funds solely depends on your requirements and risk profile. You could pick a fund that suits your profile from the above list of mutual funds.

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How to Buy Mutual Funds

Millions of Americans buy mutual funds by simply choosing them as an investment option in their 401k plan. How do people go about investing in mutual funds outside of their retirement plan at work?

There are at least three popular ways average people buy mutual funds, each with its advantages and disadvantages. Where to invest depends to a large extent on how involved you are willing to get in the process. Some people want to learn how to invest, and others want to rely on someone else to handle their investments.

Let's look at three popular ways to buy mutual funds, starting with how to invest if you want to rely on someone else.

If you want to buy mutual funds with a minimum of time and effort on your part, contact an investment professional. Even though these folks usually call and solicit you, you can call them. Look in the phone book under financial planners, stock brokers, or investment services. Some life insurance agents sell mutual funds as well. Perhaps your local bank or credit union has a representative on board who sells mutual funds.

The advantage of this approach is that someone helps you make financial decisions, and deals with the details, including the paper work. The disadvantage is that you will pay sales charges (loads) and/or other fees that you can otherwise avoid. Rather than choosing a professional at random, I suggest you ask investors you know who they deal with, and how they feel about them. Needless to say, some professionals in the investing business are better than others at their job.

A second popular way to buy mutual funds is the "supermarket" approach. For example, by opening a brokerage account with a major discount broker, you should have access to hundreds of funds to buy. To get started, go to your computer and search for "discount brokers". Once you have an account with money in it, to buy mutual funds you just click to buy.

The advantage here is the wide selection of funds available from several different fund families. You should be able to buy funds without sales charges, but there will be transaction fees, which are often quite reasonable. On the other hand, this is basically a self-serve supermarket. If you want advice on how to invest or where to invest your money, service is limited.

The third approach is to go with a no-load fund family like Vanguard, Fidelity, or T. Rowe Price. Search "no-load funds" on your computer to find a list of them. These investor-friendly investment companies have toll-free numbers you can call for assistance in opening up a mutual fund account.

There are numerous advantages to this third approach to investing in mutual funds. You deal directly with the mutual fund company, there are no middlemen. You can talk to their representatives toll-free and ask questions without sales pressure. They are used to talking to average folks who are not rich, and who don't speak the language of Wall Street.

The major no-load fund families offer a broad variety of mutual funds that have no sales charges, and often have some of the lowest yearly expenses in the industry. This makes their no-load funds a low-cost way to buy and hold mutual funds. Plus, these mutual fund companies offer investor assistance and services that are free of extra charges and fees.

When you invest with a no-load fund family, you can buy or sell mutual funds on your computer or toll-free on the telephone without paying any sales charges or transaction fees.

The disadvantage here is that you make your own investment decisions. You decide how to invest and where to invest your money in the various mutual funds they offer. Plus, you may be required to fill out your own forms, like the application required to open an account.

You can save thousands by buying no-load funds directly from a no-load fund company. This is the best way to go IF you are up to speed on how to invest and investment basics. If you are still clueless, there are plenty of articles available to help you learn about investing and mutual funds.

A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.

Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com

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Mutual Funds - Shredding the Evidence

It's legal. And it's a lie. It's an amazing truth about this highly regulated industry. Understanding these contradictions can make a big difference as you decide how to invest your money for your future. The most amazing disconnect: The mutual fund industry exists to protect and grow your money. Turns out it's a myth, an illusion, the stuff of dreams, or maybe even a nightmare. And it's amazing how much time, money, and effort is spent to cover up this most important fact. The truth is, the mutual fund industry just doesn't grow your money that well.

Taking a look at how all mutual funds invest, 85% of them are "actively managed." This is basically anything that isn't an index fund or a value fund. This means that they invest in various stocks, bonds, and money market funds, have an investment objective, and are actively managed by a portfolio manager. But even many value funds are actively managed. So if you add in that 5%, 90% of mutual funds are actively managed, leaving only 10% to "unmanaged" index mutual funds.

A study done for the New York Society of Security Analysts, covering about eight years, from 1997 to 2005, compared the 20 largest mutual funds. They were compared to the S&P 500. One thing that was found was that out of the 20 largest mutual funds, five were either closed down or merged into another fund. This is an example of how their behind-the-scenes work serves them, not the investor. When a fund family has a bad mutual fund, they get rid of it. Fund managers just make it disappear and recombine the assets with other funds.

One result of this is you can't find the returns on that mutual fund. A company can't have funds that make that mutual fund company look bad if their main purpose is to market funds, after all.

This manipulating of returns is called "survivor bias." If you're in a mutual fund that's underperforming, they will merge you into another mutual fund and delete the history of the bad performer. When an investor looks at a mutual fund company, of course the company will promote all their great performing funds of that moment. It's all a part of the great deception.

Even though they always issue the standard disclaimer that past performance doesn't indicate future results, they know that showing those great returns over the past year or two will entice you in. Of course, they also know this is not likely to be the best thing for you. Also, they will continue to shut down the bad funds. An investor can never get a true picture of the performance of a fund company because of the way they manipulate their numbers.

What the previously mentioned research from 1997 to 2005 found was these 20 largest mutual funds grew by an average of -9% a year. This information will never be found in a press release from any fund companies. From 1997 to August of 2005, these funds were losing 9% a year. During that same time period, the S&P 500, available in an unmanaged index fund, was growing at -2.7%. So this was still losing each year, but nowhere near as bad as -9% each year. These 20 largest funds did three times worse than an unmanaged, cheaper index fund. It's important to know this often-hidden information before investing money in the market.

RC Peck, CFP®
Registered Investment Advisor, Founder of Fearless Wealth
Investment Education for Successful Professionals.
http://www.fearlesswealth.com

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Creating Wealth With Mutual Funds

For ten years or more, U.S. investors in increasing numbers have depended on mutual funds to save for their retirement plans, creating wealth and other financial objectives. Mutual funds offer the benefit of diversification along with professional management. Diversification is obtained within the Mutual Fund. The fund manager buys and sells individual stocks from a variety of different market sectors thus diversifying the holdings within the fund. When you invest in mutual funds, as with other investments you are also taking a risk. For mutual funds, however, these risks are reduced by the diversification within the fund. As individual stocks may have large fluctuations in their value, the mutual fund helps smooth out these fluctuations by holding several different stocks from different market sectors.

Wise investors understand that there are up's and down's when investing in mutual funds. It is important to choose a mutual fund product that will match your financial goals against your tolerance for risk. Before investing in a mutual fund, obtain a copy of the fund's prospectus and review the investment strategy and market sectors it invests in. If you are comfortable with where and how they invest, this fund may be a good match for you. On the other hand, if you are not comfortable, save yourself the anxiety and find a different fund. There are hundreds of funds to choose from and choosing one that fits you can give you that piece of mind down the road.

Fees along with taxes will reduce the return on a mutual fund investment. Most mutual funds carry some kind of fee sometimes call a load. This is the fee to cover the fund management expenses. Many mutual funds are "no load". They do not charge a percentage to invest like the loaded funds do, but there are still fees involved. The fees are calculated and taken from the returns before distribution to the shareholders/investors. However the fees are collected, they are necessary for the fund to operate. The fund managers are under tremendous pressure to ensure the fund has a good rate of return and they are paid very well to take on this responsibility.

A mutual fund is a company that collects and pools money from various investors and invests the revenue or money into short-term money-market instruments, stocks, bonds, and other assets or securities. The collective holding's a mutual fund owns is referred to as a portfolio. When you invest in a mutual fund, you are investing in a portion of the fund's portfolio. Each share identifies an investor's proportionate ownership in the fund's holdings and the revenue those holdings have generated. Go to this site to increase your knowledge on investing.

Listed below are some traditional and distinguishing character traits of mutual funds:

* When investors buy mutual fund shares, they buy from the fund or from a stockbroker not from other investors on a secondary market, like the Nasdaq Stock Market or New York Stock Exchange.

* The amount the investor pays for mutual fund shares is the fund per share net asset value or NAV combined with any shareholder fees that the fund may charge at the time of acquisition (like sales loads).

* Mutual fund shares can be redeemed which means that investors can sell their shares back to the fund, who produce and sell new shares to sell to new investors. Mutual funds sell their shares continuously. Some mutual funds do stop selling shares when the fund gets to be too large.

* The investment portfolios of mutual funds are generally managed by investment advisors, which are separate entities.

Mutual funds seem to be a favorite investment instrument in both 401k's and IRA's. 401k's usually offer a variety of funds to choose from and are selected based on the level of implied risk associated with the investment strategy. You simply choose your level of risk comfort and invest in the fund that is offered at that level. Many allow you choose more than one fund and to reallocate your investments at various times throughout the year. Check with you particular 401k to see what the rules are.

Investors like mutual funds for IRA's because there is little to keep track of once the fund is selected. Changes are rarely made to this type of long-term investment and investors may only check the fund's performance once or twice a year. Whatever your investment goals, a good portfolio usually involves diversified investments such as stocks, bonds and mutual funds.

Creating wealth for you and your family means providing your family with an in-depth financial education that includes learning about stocks, bonds mutual funds and more. Children should be taught about financial products as soon as possible. Hopefully your plan for creating wealth includes family meetings where finances are discussed and decisions are made.

Investing does involve risk but, with knowledge, that risk can be managed. The greatest risk is the lack of knowledge.

Craig Sipe

Craig, a native of Northwest Ohio, has been a manufacturing front line supervisor for over 18 years. After being downsized from one company and then the next company declared bankruptcy and closed, he relocated to West Virginia for another supervisory position. Dissatisfied with the lack of security, advancement opportunity, limited income potential and freedom to live the life style he desired, he began to search the internet for a better business. Finding the direct sales industry gave him the resources to fulfill his lifestyle goals and to help others achieve their dreams and desires.

Mutual Fund Investing

Need Help with Investing? Look into Mutual Fund Investing.

Mutual fund investing requires that you continuously check the returns it has given in the last five years, 3 years minimum. Find out the top mutual funds by category and pick the best. Mutual funds are exceptional for new investors because you can invest small amounts of money at regular intervals with no trading costs. It is helpful to understand the investment basics.

It is important to understand mutual fund investing by category since there is a different investment risk and different rewards associated with it. There are different types of mutual funds ranging from blue chip funds, mid cap funds, small cap funds, and many more. Mutual funds are categorized by the way they yield returns to investors. They can be fixed income, global, growth, core, mixed equity, sector, and mixed equity. Research on this topic is crucial in order to avoid possible investing errors when mutual fund investing.

When relying on mutual fund investing, be sure to decide where you want your funds to be positioned. Ensure that you do the research required and find the top mutual funds by category. Mutual funds are a hot commodity with individual investors and financial institutions. Mutual funds are actively managed by a financial money manager who constantly monitors the stocks and bonds in the fund's stock portfolio. Mutual fund investing is a good match for traders interested in long term investing.

Mutual Fund Investing by Category Include:

Equity funds: Equity funds are high investment risk funds.

Growth mutual funds: One of the top mutual funds by category a well as the most popular.

Core: These are large cap blend funds owning big companies with standard stock prices.

Global: An index of different countries would be the deciding factor of such mutual funds performance.

Fixed income: This type of mutual fund provides a fixed cash-flow to investors. When mutual fund investing, it's wise to invest largely in government and corporate debt when the fund holdings increase in value.

Sector: These mutual funds are restricted by particular market sectors.

Mutual fund investing is great for long-term investments strategies.

Investors who partake in mutual fund investing should understand the investment objectives, the risks, and the expenses of a fund very cautiously before investing in stock. Investors will usually buy shares in small quantities through a broker at a discount to the net asset value or at a small premium. Investors who use a tax-advantaged account can avoid paying taxes on mutual fund distributions when mutual fund investing. Investors like to see the rate of return on investment for a mutual fund, and know how that fund compares to like funds.

When mutual fund investing, shares of mutual funds will vary in value. They are also subject to investment risk, including possible loss of the principal amount invested. Shares of mutual funds are not guaranteed by financial institutions and are not insured by the Federal Reserve Board or by the Federal Deposit Insurance Corporation. Share of mutual funds will involve risk due to the fact that they include the possible loss of the principal amount invested. Shares of mutual funds are bought and sold at the fund's net asset value when mutual fund investing.

Money market funds hold 26% of mutual fund assets in the United States and they have somewhat of a low risk as compared to other types of mutual funds. Money market funds are also known as principal stability funds and are a great investing strategy to learn. Money market funds are included in strategies used for portfolio diversification.

Mutual Fund Investing is a great way to make money investing in stock.

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8 Reasons Why Mutual Funds Make For Lousy Investments

Many people think that investing in mutual funds is the way to go and the best method for getting rich. I think mutual funds are horrible investments. Here are 8 reasons why you should not invest in mutual funds.

1. Mutual funds don't beat the market.

72% of actively-managed large-cap mutual funds failed to beat the stock market over the past five years. Trying to beat the market is difficult, and you're better off putting your money in an index fund. An index fund attempts to mirror a particular index (such as the S&P 500 index). It mirrors that index as closely as it can by buying each of that index's stocks in amounts equal to the proportions within the index itself. For example, a fund that tracks the S&P 500 index buys each of the 500 stocks in that index in amounts proportional to the S&P 500 index. Thus, because an index fund matches the stock market (instead of trying to exceed it), it performs better than the average mutual fund that attempts (and often fails) to beat the market.

2. Mutual funds have high expenses.

The stocks in a particular index are not a mystery. They are a known quantity. A company that runs an index fund does not need to pay analysts to pick the stocks to be held in the fund. This process results in a lower expense ratio for index funds. Thus, if a mutual fund and an index fund both post a 10% return for the next year, once you deduct The expense ratio for the average large cap actively-managed mutual fund is 1.3% to 1.4% (and can be as high as 2.5%). By contrast, the expense ratio of an index fund can be as low as 0.15% for large company indexes. Index funds have smaller expenses than mutual funds because it costs less to run an index fund. expenses (1.3% for the mutual fund and 0.15% for the index fund), you are left with an after-expense return of 8.7% for the mutual fund and 9.85% for the index fund. Over a period of time (5 years, 10 years), that difference translates into thousands of dollars in savings for the investor.

3. Mutual funds have high turnover.

Turnover is a fund's selling and buying of stocks. When you sell stocks, you have to pay a tax on capital gains. This constant buying and selling produces a tax bill that someone has to pay. Mutual funds don't write off this cost. Instead, they pass it off to you, the investor. There is no escaping Uncle Sam. Contrast this problem with index funds, which have lower turnover. Because the stocks in a particular index are known, they are easy to identify. An index fund does not need to buy and sell different stocks constantly; rather, it holds its stocks for a longer period of time, which results in lower turnover costs.

4. The longer you invest, the richer they get.

According to a popular study by John Bogle (of The Vanguard Group), over a 15- or 16-year period, an investor gets to keep only 47% of a cumulative return from an average actively-managed mutual fund, but he or she gets to keep 87% of the returns in an index fund. This is due to the higher fees associated with a mutual fund. So, if you invest $10,000 in an index fund, that money would grow to $90,000 over that period of time. In an average mutual fund, however, that figure would only be $49,000. That is a 40% disadvantage by investing in a mutual fund. In dollars, that's $41,000 you lose by putting your money in a mutual fund. Why do you think these financial institutions tell you to invest for the "long term"? It means more money in their pocket, not yours.

5. Mutual funds put all the risk on the investor.

If a mutual fund makes money, both you and the mutual fund company make money. But if a mutual fund loses money, you lose money and the mutual fund company still makes money. What?? That's not fair!! Remember: the mutual fund company takes a bite out of your returns with that 1.3% expense ratio. But it takes that bite whether you make money or lose money. Think about that. The mutual fund company puts up 0% of the money to invest and assumes 0% of the risk. You put up 100% of the money and assume 100% of the risk. The mutual fund company makes a guaranteed return (from the fees it charges). You, the investor, not only are not guaranteed a return, but you can lose a lot of money. And you have to pay the mutual fund company for those losses. (Remember also that, even if you do make a return, over time the mutual fund company takes about half of that money from you.)

6. Mutual Funds are unpredictable.

The holdings of a mutual fund do not track the stock market exactly. If the market goes up, you might make a lot of money, or you might not. If the market goes down (the way it is now), you might lose a little bit of money . . . or you might lose A LOT. Because a mutual fund's benchmark isn't a particular market index, its performance can be rather unpredictable. Index funds, on the other hand, are more predictable because they TRACK the market. Thus, if the market goes up or down, you know where your money is going and how much you might make or lose. This transparency gives you more peace of mind instead of holding your breath with a mutual fund.

7. Mutual Funds are sales items.

Why don't all these money and financial magazines tell you about index funds? Why don't the covers of these magazines read "Index Funds: The Most Obvious And Rational Investment!" It's simple. That's a boring heading. Who would want to buy something that isn't exciting or that doesn't tickle one's imagination of immense riches? A magazine with that headline won't sell as many copies as a magazine that boasts "Our 100 Best Mutual Funds For 2008!" Remember: a magazine company is in the business of selling... magazines. It can't put a boring headline about index funds on its front cover, even if that headline is true. They need to put something on the cover that will attract buyers. Not surprisingly, a list of mutual funds that analysts predict will skyrocket will sell loads of magazines.

8. Warren Buffett does not recommend mutual funds.

If the above seven reasons for not investing in mutual funds don't convince you, then why not listen to the wisdom of the richest investor in the world? In several annual letters to the shareholders of Berkshire Hathaway, Warren Buffett has commented on the value of index funds. Here are a few quotes from those letters:

1997 Letter: "Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results (after fees and expenses) delivered by the great majority of investment professionals."

2004 Letter: "American business has delivered terrific results. It should therefore have been easy for investors to earn juicy returns: All they had to do was piggyback corporate America in a diversified, low-expense way. An index fund that they never touched would have done the job. Instead many investors have had experiences ranging from mediocre to disastrous."

Bottom Line: If you want to make money, you need to copy what rich people do. So if Buffett doesn't like mutual funds, why would you? So, if not mutual funds, what should passive investors invest in? The answer by now is clear. Invest in index funds. Index funds have lower fees, and you keep more of your returns in the long term. They are also more predictable, and they give you peace of mind.

The author of this article is Jim "The Net Fool".

He is owner of theNetFool.com If you'd like to learn more about the stock market or internet marketing, you can visit http://www.thenetfool.com You'll find all the information you need!

5 Reasons Why Mutual Funds Will Outperform Stocks

For most investors, the magic number before stepping away from mutual funds should be roughly 1/2 of a million dollars. This is because at that level, dedicated investment managers will take and spend the time to manage your portfolio for a decent chunk of change, which in many case is tax-free. So where should you invest while you build that nice little half-mill? Why, funds of course (including ETFs). Here are five reasons why funds and ETFs are the way to invest:

1. Mutual funds offer professional investment management for a marginal fee. While most dedicated investment managers will argue that their slightly higher fees (often) are tax-free, they are often higher than what most mutual funds will charge. Ultimately, the quality of mutual fund investment management is either greater than or equal to that of dedicated investment manages (in fact, many investment managers are the same if you are dealing with a large money manager anyway).
2. Funds provide a great deal of diversification. While there is a risk of "over" diversification, mutual funds aim to return the highest return with the minimal risk. This means no single security should cripple the fund.
3. Funds are extremely transparent, highly regulated and easy to understand. The quality of information about specific funds is quite high. Finding out information about potential investments is simple.
4. Fund offerings are diverse enough to fill whatever gap an investor needs to fill. Whether an investor is looking to round out their portfolio with bonds, small cap value securities or even steady, large cap dividend-paying securities, there are numerous funds and fund companies that exist to meet that specific need.
5. Funds are easily accessible often at no cost. Depending on how you invest, there are often ways to purchase mutual funds without paying a Load (think of it as an administrative charge for making the purchase) or a transaction fee (this is similar to a trade commission).

As demonstrated above, there are few reasons why funds cannot meet an individual's specific investment needs. Of course, this argument can be invalidated by the fact that many funds do hold a lot of securities. So much to the point that all but system risk is diversified out of the investment. And this is, of course a valid argument... provided that the investor has the knowledge and resources to outperform the fund to begin with.

--> Reverse-engineer your Investment Management Decisions... Watch the video on Rogue Investment Tactic #1!

Chris has more than 16 years of experience with Investments. He is the Fund Advisor for the MutualFundSite.org, a website that suggests that people who want to know Where To Invest are best purchasing Mutual Funds in their portfolio(s).

Article Source: http://EzineArticles.com/?expert=Chris_Blanchet

Rogue Mutual Fund Investing

One of the most common amateur techniques for stock picking involves standing around the water cooler (or online message boards) and picking up on cues given by people who know someone who know someone else who knows yet another person who said this or that and, get this, Stock XYZ is where you want to be. In some cases, these tips work out to the advantage of all those who risked their grocery money or mortgage payments. In many more cases, however, those types of tips do not work out.

See, investing is a lot like the game of poker. While skill and knowledge are clearly valuable, there is always an element of luck. Even the greatest companies with the greatest results can see their stock price plummet... based simply on an outlook that was moderately lower than what investors had hoped for.

This further reinforces the power of mutual funds as an intelligent investment option for every investor. But many defiant investors will argue until they turn red in the face (or suffer a stroke) that there is too much "garbage" in a fund. They will argue that most people should pick the winners instead of taking the whole basket.

The question becomes: which are the winners? So many companies publish great quarterly or annual results only to see their stock price drop. So, how do you pick those winners and what makes those "losers" unqualified?

To make the process easier for investors, consider reverse engineering your investment decisions. Have a handful of stocks that are "guaranteed" to double or triple over the course of the year? Perfect. Buy them... within a mutual fund. Here is how you can enjoy those great returns while protecting yourself against the downside (take note: if you have 5 "sure bets," at least 2 of them will tank).

1. Search for the Major Mutual Fund owners of the stock(s) in question. For example, let's look at Apple Inc. Its largest Mutual Fund owner is the Fidelity Contrafund.

2. Investigate the Mutual Fund instead of the stock as it is much easier to do. In keeping with the example above, the Fidelity Contrafund is a highly ranked fund (and has been for the past 10 years). It is considered to have average risk for above average returns compared to other funds in its peer group (unlike Apple alone which would be higher risk on diversification reasons alone).

3. Purchase the mutual fund if it meets your risk and objectives rather than the stock. In keeping with the example above, let's assume that the talk around the water cooler was wrong and Apple tanks the the same week that Google skyrockets... good thing you bought the fund instead; the Fidelity Contrafund used in this example also owns Google.

Ultimately, owning a mutual fund, even if you are reverse engineering your investment decisions, allows you to enjoy a greater deal of diversification, which is a fundamental of proper asset allocation.

Free Video On How to Use This Rogue Investment Management Technique at the Mutual Fund Site. Chris has more than 16 years of experience in the Mutual Funds industry. He is the Fund Advisor for the Mutual Fund Site at MutualFundSite.org.

Article Source: http://EzineArticles.com/?expert=Chris_Blanchet

The Top Mutual Funds & Your Best Investment

The top mutual funds are funds from mutual funds companies that are investor friendly. These top mutual funds are actually easy to find, and are probably the best investment for most people. Here's how to find funds that work for you and give you a performance advantage year after year.

The top mutual funds offer you an investment advantage year after year and they can prove it. These are your best investment if, like most people, you need help managing your investment assets. I call them investor friendly simply because they do not charge you an arm and a leg when you invest money with them; plus they offer good service and a broad array of investment options.

Mutual funds are sold to investors and managed for them by mutual fund companies or families. Some market their funds through middlemen and pay professional money managers big bucks to actively manage their funds in an attempt to outperform their competitors and/or benchmarks. Then they pay big bucks to advertise. Who pays for all of this? Put another way, do you always get what you pay for?

Since NO mutual fund can prove that it consistently outperforms its competition, it makes no sense to look for the top mutual funds based on past investment performance. Middle- men can cost YOU sales charges of 5% or more off the top when you invest money. Active professional management and high marketing expenses and other services can cost you 2% or more a year to just hold your investment. I don't call that investor friendly. No, you do not always get what you pay for.

The top mutual funds, in my opinion, work with you and not against you by operating efficiently and honestly while passing the savings on to you. Some of the largest fund companies in America work directly with investors and offer good service at low cost. In my opinion this represents the average investor's best investment. Simply put, all costs associated with investing work to eat away at your investment earnings. For example, if you can get 2% interest a year at the bank, why pay 3% off the top and more than 1% a year to earn 5% or 6% in a bond fund?

Here's how to find the top mutual funds that are investor friendly with low costs. Start by going to the internet and searching "no-load funds". These funds have NO SALES CHARGES or commissions when you invest directly with the fund company. Then go to a couple of the sponsor sites at the top of the page. For example, Vanguard, Fidelity and T Rowe Price will likely be there. They are large mutual fund companies.

Then go to one of these sites and search for INDEX FUNDS. These funds do not actively try to beat their competition or benchmark (which is an index). They simply invest in line with the index to duplicate its performance. By doing this they save on management costs and pass the savings on to you. Since few funds consistently beat their benchmark, and many perform worse, why take a chance and pay extra for active management?

Check out the EXPENSE RATIO of the various index funds a company offers. Since these are no-load funds there are no sales charges, but all funds charge for yearly expenses. For example, you can find stock and bond index funds with expense ratios of less than ½% a year. Basically, that's your total cost of holding that investment for a year. A low cost of investing gives you higher net profits, and works to your advantage year after year.

A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.

Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com.

Article Source: http://EzineArticles.com/?expert=James_Leitz