Mutual Funds

For some good basic info on investing try "Money" magazine. It has easy to read and understand info on all sorts of investments. They also have a list of the best performing mutual funds in all kinds of categories. DO NOT GO WITH THIS YEAR'S TOP PERFORMER. It's almost guaranteed to be a bust next year. Look at the five-year and ten-year returns on investments and pick one that has a low fee ratio and has a long track record.

shewolf, I'm glad you're looking into mutual funds, because that's the sanest way to invest for amateurs who understand very little of "investing" in the stock market. Mutual funds essentially spreads the risk of large gains or losses. What is important is the long-term performance of any fund compared to the major indices like the DOW and Nasdaq, but there is never any guarantee how they performed in the past is how they will perform in the future.

I would recommend several investment institutions for you to look at: Fidelity, Vanguard and yourself. You must always be vigilant about how your funds perform, because not all funds are created equal. You must learn to change funds that have not performed to your expectations.

Generally speaking, while young and beginning to invest in funds, you must determine what your risk level is to decide what ratio you wish to invest between stock funds and bond funds. The younger you are, the greater percentage should be in stock funds. As you get closer to retirement age when you can't risk your retirement funds, you need to switch a greater percentage to bond funds.

These are only the basics, so you need to do your homework on where you stand and what your goals are.

I'll be glad to answer any specific question(s) you might have.

I invest through a financial advisor that I've had for 20 years. They charge you a fee and they get a percentage of your purchases, but they also do homework on what you want to invest in, are licensed, attend seminars, and are uptodate on what's up. They'll provide graphs, charts, whathaveyou on the products/companies/commodities you're interested in.

A financial advisor should determine whether you're low-risk, med-risk, or high risk, and what your financial needs will be. They should interview you to determine what kind of money you would like to have IN TODAY'S DOLLARS upon your retirement.

They should keep you apprised of your financial status regularly and meet with you at least twice a year to review your account - move you out of slow growth funds, for example.

There are funds that you pay a percentage when you buy in, and others that you pay when you remove your money. You need to determine whether these fees will come out of the money you're investing or will be paid separately, but in all cases, you need to determine what the load will be.

Lastly, never trust anyone. Check out, intially, at least, all the funds they recommend before giving them your money or signing any papers. I'd go with a company that's been around a while, and with a broker or advisor you feel good with. THat's very important.

You can also contribute lump sums or monthly installments on some investment accounts, so check into that.

Good luck - it's a fun thing to learn about, and remember, it's YOUR money!

Mutual funds are basically where people pool their money in order to buy stocks. This is more efficient than trying to guess and buy stocks yourself, as you save on fees, commissions, and you pay a professional to pick the stocks.

Some mutual funds do great, others do poorly, and there is no guarantee as to which fund you will pick. Additionally, mutual funds have to pay the professional gambler that picks the stocks.


The advice I like is to stick with index funds. An index fund follows one of the major stock indices (Dow Jones, Russell 2000 Index, etc.). You know exactly how your fund is doing just by watching the stock index. They also have lower fees, as there isn't anyone picking stocks.


This is what I've learned from dipping my toe in the investment waters. Here's the best plan for getting rich I've ever heard (From Scott Adams, author of Dilbert; 'Dilbert' deserves the economics Nobel:


1. Make a will
2. Pay off your credit cards
3. Get term life insurance if you have a family to support
4. Fund your 401k to the maximum
5. Fund your IRA to the maximum
6. Buy a house if you want to live in a house and can afford it
7. Put six months worth of expenses in a money-market account
8. Take whatever money is left over and invest 70% in a stock index fund and 30% in a bond fund through any discount broker and never touch it until retirement
9. If any of this confuses you, or you have something special going on (retirement, college planning, tax issues), hire a fee-based financial planner, not one who charges a percentage of your portfolio



Personally, I might move "buy a house" up on the list, provided you know you will stay in the same place at least 5-7 years.

...MUTUAL FUNDS...

the above website and its many links will give you a good introduction to mutual funds .

here are my 2 c worth of advice ;
- there is no need to rush out and buy into a fund ; take the next several weks to learn about it ;
- your best investment may be the mortgage on your own house - if you have no morgage payments left : GREAT !
- once you have decided "to get your feet wet" , choose a relatively low-risk plan - which will also have a lower return - to start with ,
- monthly payments should not be higher than you can afford ! you are in for the long run ! usually you'll need 3 to 5 years to see a good return appearing ,
- don't use a scattershot approach ; pick two or three good and solid funds and invest on a regular monthly basis (you can often pay as litttle as $25 a month) ,
- be aware of commission charges , front-end loads , back-end loads ... they can eat up a lot of your invested money !!!
- it's NOT a get rich quick plan - PATIENCE , PATIENCE , PATIENCE and DILIGENCE !
- your library should have some good books available ; perhaps you may even want to 'invest' $50 in buying a couple of basic investment books .

our local community college runs some very good investment courses for investors at all levels every semester - an inexpensive way to learn and meet other investors .

remember :
investigate before you invest !

if it looks to good to be true , it's likely NOT true !

keep track of ALL your money including your investments on a monthly basis .

GOOD LUCK !
hbg

Wow.. fabulous advice. Thank you every one.

So, my next question is -

I have not answered this thread because I have been working out my finances to find out exactly how much I could put aside/invest.
And I have come to the conclusion that I can afford 40 a week so long as I work 4 days out of the week.

In the event of course, someone cancels, or I have to cancel, I will not be able to do that.

This means I may not be able to be 100% with that amount all the time.

Would a mutual fund still be a good idea?
Or should I look at .. a money market?

I do not have the option of a 401k as I work for myself.
Nor do I really have an option at a specific stock .. though.. I dont want to dump all of my eggs in one basket either.

Large investments , house, cars..etc.. are out of the question right now as well.

I am really pressing our budget with this 40 a week, but if i stick to that for one year, I have a great base on which to operate and that is my goal.

What is a money market account anyway?

how about a CD?

I have no ideas for you shewolf, but thanks for starting the thread (bookmark).

A money market account is similar to a savings account, or interest bearing checking account in a bank, but offered through an investment company. They sell 'shares' in the account at $1.00 per share and give you a checkbook. Interest rates are pretty low, the money won't grow, but they're a safe investment.

CDs (certificate of deposit) are available at banks, and other places, and pay higher interest than money market or interest bearing checking accounts, but you don't have access to your money until the certificate 'matures' which is anywhere from one month (lower interest) to five years (higher interest).

Most funds or brokerage accounts require a minimum to open an account.

$500 seems to be common these days.

Once you have opened an account the fund will accept smaller weekly or monthly amounts.

Since you are self employed you want to fund an IRA if you are fairly sure you can do without the money. A Roth IRA has special circumstances that allow you to take the money out without penalty.

I don't think anyone has mentioned it yet but check out the Morningstar ratings for any funds you are considering. It's not the be all and end all of how to pick funds but it can weed out some bad ones quickly. Then as mentioned check out the costs. You might be better getting an online brokerage fund and putting all your money into a market tracking stock like Spyders or the QQQQs. Many offer $5-7 trades. You can put money into the account which would go in a money market then buy the stock as you get enough cash to make it worth the trade. $5 on a $50 trade is 10% but on a $250 trade is an easy to swallow 2%.

The other question is your aversion to risk. Are you going to check out your fund daily or weekly? If you see it go down 10% in one day or week are you going to panic and not be able to sleep at night?

shewolf :
living in canada , i'm not familiar with u.s. retirement plans .
my suggestion is : go slowly and play it safe - at least for a while - le'ts say a year .
check around and see if you can find a savings account paying reasonably good interest - 3 to 4 % . here is canada , credit unions usually pay slightly higher interest than banks .
start socking away the money you don't need immediately .
once you have accumulated $1,000 , look back and determine if you have been able to set money aside regularly - will you be able to continue doing so ?
if you are satisfied , take HALF the money and start contributing to a mutual fund .
make sure you have an emergency fund that you can access any time - like a savings account .
you should be sure that you DO NOT need to take the money out of your mutual fund for a minimum of three years - otherwise you may be buying HIGH and selling LOW - and that's the last thing you want to do .
no need to rush into it - if you start with regular contributions to a SEPARATE savings account , you can't really do anything wrong and you get a feel for how much money you can set aside on a REGULAR basis .
we'll stay tuned !
good luck !
hbg

ps. as was stated by someone : make absolutely sure you have NO outstanding credit card or similar debts on which you pay interest - that's money thrown out the window !

hamburger makes some good points; and perhaps he's been reading the Report on Business section of the Globe and Mail, like me, where the front page features an article about a chartered accountant's book (Smoke and Mirrors -- Financial Myths That Will Ruin Your Retirement Dreams by David Trahair). He also advises paying down debt:

"...the beauty of paying down debt is that it's risk-free; one can't say the same of the stock market, particularly when the financial industry is skimming a couple of percentage points off the top of fund returns in the form of fees and commissions.
"There's no way you're going to beat a 20-per-cent after-tax rate of return which you can get by paying off a credit card," he says."

We have mutual funds only because of 2 lay-offs -- severance packages went into RRSP's to avoid massive taxes. Since then we have concentrated on paying off our mortgage. We have a far better retirement fund in our houses's worth than we'll ever have in our RRSPs.

I know you're not thinking of buying a house just now, but if you can find a savings vehicle with a high rate of return so that you can save for a future down payment, it might be something to consider.

The mutual fund companies are scare-mongering like crazy just now at RRSP time. A few years ago it was all TV commercials of early retirees on sandy island beaches enjoying the fruits of mutual fund investments. These days its 70 - 80 year olds behind fast food counters as mutual fund companies try to scare us with the terrors of growing old without enough retirement income. You're smart to be thinking about your future (especially as you're self-employed) but there's more than one way to save. Don't rush into anything.

i certainly agree with tai chi !
unless shewolf - or anyone else - never intends to buy a house/condo , paying down one's own debt and saving for a down-payment seems like a sensible way for most of us .
i know there are some sophisticated (lucky/foolish ?) imvestors who claim one should take on the biggest debt possible and invest in the stockmarket for maximum profit . unfortunately , i've met a fair number of people who've lost thier shirt in the process - mrs h and i like to sleep in peace , even at a lower income .
you said it well , tai chi !
hbg

Let me clarify the debt issues.

I spent 2 years paying off ALL of my debt.

I do mean ALL.

I have a few hospital bills that I truly can not pay for. They were tests that were done when I had my stroke and cost about 10,000.
Since hospital bills only make up about 15% of your credit rating, I am leaving those alone.

I have 2 open accounts right now. One is my car, which has always been up to date, paid on time.
And the other is a new TV we bought when we moved in here. We decided a great space saver since we are 3 people in a very tiny apt, was to get a tv mounted on the wall.

We did that.

And it is a payment of 40.00 a month wich ...again.. never late. On time, in full.
Because I had bad credit before, this payment is a must in helping build my current credit rating.
I was on the road to working out a house purchase. But our current finances just dont allow a mortgage payment, home owners insurance, land taxes.. etc. And if we could afford that, we would have to have a credit rating that would be over 700 points. HA! Dont make me laugh. It isnt happening.

So I financed a TV to help build credit, and once it is paid off, I will finance another small object that I could afford to pay in full at any time.. and make payments on it to help boost my credit.

I have no credit cards.

And I only have other , typical monthly bills.
Rent, utilities , car insurance, medical insurance.. etc.

So with that minimal responsibility, I can afford to be a bit risky with my investments, but not too much. I cant take the risk of losing it all down the line.

In the short term... Lets say I invested ... 200.00 some where. And I lost that in about 2 years.
THAT would be ok with me. That is less then what I have in savings and something that I can live with out.

If I lose more then what I have in my savings , we will sink.

So that is about how I picture investing.
Sort of like lending money to a friend.

Never give out more then you are ok throwing away..

here is another 2 c (canadian :wink: ) worth of advice .
why even loose $200 ?
the chances of making much money with a $200 investment are pretty slim .
you said you could set aside $40 a week - that's about $2,000 a year PLUS some interest - probably $4,500 GUARANTEED ! in two years - and no worry about losing even a penny of it .
at that point you might want to consider putting some of your weekly savings into a mutual fund - perhaps you might even have the money for a downpayment for a small house at that time .
as i said : it's worth 2 C (canadian) .
hbg

Several months of expenses set aside in a money market account could be a very good thing.

yep, start there first (IMO) and then once you have a cushion earning interest in easily available funds, you can start funding a Roth IRA (can be invested in mutual funds, depending on the provider).

Kudos to you shewolf for taking the step and thinking of the future. $40/week will add up quickly if you set it aside and don't touch it unless you have to.

I opened an eSavings account with citi bank. They're paying over 5 percent in a liquid savings account that you can add or withdraw without penalty or fees.

Also try the internet savings banks; they pay over 5 percent interest on savings accounts.

Darlin... it's gonna take a little more than that to retire... and Mutual Funds are the opposite of friends. You will get it back... and over the long haul, invariably with lots of interest if you stick with moderate to low risk. Even with high risk funds, the odds of losing over the long haul are exceedingly small.

I'd recommend Ameritrade if you are just doing funds anyway. No need to pay broker fees for that. They also have some handy calculators to help you figure out what you need to invest for retirement, based on your own goals. You can check some out HERE

shewolf, Go the the following link; it's not only educational, but they rank mutual funds. HERE.