The only advice I can give is to watch costs.
The Market has
historically returned 10% to 12 % depending on what period is recorded.
A Mutual Fund that tries to emulate the historic performance of the Stock Market would underperform by a small amount assuming it had no costs.
Now let's look at the overhead: if a fund draws 2% over the years, that is one fith --or twenty percent--of the return. This drags down the retuen tremendously.
If you add a Sales charge of 6%, than a $10,000 investment would cost you $600.
Imagine how that would grow over twenty years if it earned 10 % per annum.
You may have seen charts by Mutual Fund Family that show a "hypothetical $10, 000 invested in some
particular Fund it manages where $10,000 has grown to, say, $47,000.
What they leave out is that the "family" manages about 72 distinct Funds and that particular Fund was expressly selected for it record. This individual record may not characterize the 71 other Funds it manages!
And when you try to invest in it, you learn that it "is closed to new investors" [SO WHY SHOW THAT ONE
] but that they have another Fund that is "similar" to it. How similar--it was just opened two months ago !
Very rarely do Funds beat their "benchmarks" over a large period of time. Families like to "pick" the few that did to "brag" about.
A "benchmark" is a reasonable Comparison with usually an Index--a mathematical construction--and some Fund. For example, a Fund that invests in large very big "capitalization" stocks would be compared to the Standard and Poor's 500, the 500 biggest Co's in the US.
A fund that invest only in Japenese stocks, against the Japanese equivalent. The problem is, even if it "outperforms' it's peers, its peers could have been doing lousy."Developing market' funds have avaraged about 2% or so. A fund that has earned 3% over the last ten years may have overperformed its "benchmark" by 50% but 3 % return is still lousy.
SO LOOK TO THE OVERHEAD of a fund which should bestated clearly in its literature, any 12-1-b fees or commissions, and any Sales or Redemption charges.
For most investors an INDEX Fund like Schwab 1000 with no sales charge and 0.5 % overhead or Vanguard S & P 500 Index Fund with 0.25 % overhead will serve them nicely --if they can hold on to it over twenty years to allow the growth of the Economy to work in their favor.
10-12% per annum compounded with minimum overhead isn't bad over a long period of time.
There is no evidence that "load " funds are managed better than "no load", so why pay a big commission.
Nobody knows what the top or the bottom is--until after its been passed. So
dollar avaraging is a way of buying Funds at both up and down periods. Reinvesting dividends is more dollar-cost averaging.
"Get rich slowly" usually beats "market timing".
I spoke to a Financial Planner aqcuaintance many moons ago, and she reported that Teachers upon retirement often had bigger Portfolios than better-paid business execs who kept up a "front" of "fancy cars" etc.
Keep in mind, though, that MUTUAL FUNDS ARE AN INCOME TAX NITEMARE. That is one reason some people prefer Stocks. You only report a capital gain with a stock when you sell--if there is one.
You may have to pay a "capital gains" tax on a Fund that has gone down for the year because they are required to report any capital gains on a yearly basis. Funky, huh
Diversification is on your side--over the long run.
Imagine having half your money in a Co. that goes bust--like Xerox. Did anybody "expect" these big Co's to "head South"? Avoid being pressured into too large a position in one stock. Times change.
Yes there are Microsoft millionaires--but that is rare. Look how many people are holding near worthless stock options. And you don't know how well the Co. will be doing when you either retire or need the money.
Max out your 401K's --especially if the Co. matches your investment. But look carefully at the investment vehicle. Don't assume your Co. did . DEFERRING taxes up front to invest the money that would otherwise have gone to taxes is a big boast --over the long run.
"Get rich slowly" but don't be the richest man in the cemetary.
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