Mutual funds

[ZX2guy19]

Alright guys, I have to do a paper for Econ312, and it is pretty much open topic on things like stocks, IRA's, MF's, and such. I am interested in doing some research on Mutual funds, but professor said that it has to be a specific mutual fund. What kinds of mutual funds are there that would have a lot of info that I could find out about? Thanks!

Also, if there is a type that you know a lot about, could you let me know the info you know? I also think I can going to open one up very soon.

[Manbearpig]

I'm no financial expert. But I have a mutual fund through Vanguard. If you want to know more you can PM me.

They are pretty cut and dry though. Some charge fee's other don't...you will pretty much guaranteed to make money as long as you stay with it. Most are not a short term money maker.

[ZX2guy19]

Do you know if there are different types?

I'll be pming you probably tomorrow. Thanks Chris.

[LunchBoxZX2]

There are thousands and thousands of mutual funds out there in the marketplace. Funds are broken down into fund "families" such as the American Funds, Russell Funds, Vanguard Funds, Evergreen funds, etc etc.

There are different share classes of mutual funds. The 3 most common types are class A, B and C. A shares are the most common, requiring you to pay a front-end load percentage based on how much money you put into the fund, with most funds offering "break points" for meeting certain investment minimums. B shares are HIGHLY frowned upon in the investment world and almost nobody will sell them to you anymore, and most of them will convert to A shares after a period of around 8 years. C shares are common among younger brokers because 1) they are easy to sell with no front-end load (they instead use a thing called a Contingent Deferred Sales Charge, or CDSC - for leaving the fund before a set time period) and they pay a trail to the broker for as long as the client owns the fund.

A shares are best for long-term investors (5+ years), C shares make more sense if you only wish to hold the fund for a period of 3-5 years.

As far as different types of funds, there are way too many to get into here... there are "target date" funds for retirement purposes, "index" funds that buy into specific market indices, sector specific funds, global funds, socially responsible funds... you name it.

My best advice for you would be to go to a website like www.americanfunds.com/funds/returns/alphabetically.htm and look at some of the funds... when you click on them it should give you a detailed breakdown of what they are designed for and what investments they contain.

Hope this helps...

[5whiskey]

May I suggest you looking into index funds?

Managed mutual funds will always charge a fee of some sort. It may be an up-front load, or it may be a percentage of your portfolio per year. You are charged this fee to pay the people that manage the mutual fund. They are always looking at buying, selling, hedging, trading, and shorting different stocks to make the fund money. Your success is tied to their success.

Index funds, on the other hand, just take one of the indexes (name one... the S&P, Dow, Russell, Nasdaq, BDI, etc.) and own as a core holding most (or all) of the major performers in that said index. The whole thing can be managed by a computer based off of what the index is doing. Edit: Most index funds also charge a fee, but the fees are far cheaper than with a managed mutual fund.

I know it sounds over-simplified, but considering the market as a whole beats about 75% of managed mutual funds on average it isn't that bad of a deal. Plus take into account that if the managed mutual fund charges 2% of your portfolio per year as a commision, that fund will have to beat the market by at least 2% for you to break even with the index fund.

Another option you may want to look into is a form of stock called an ETF (energy trust fund). There are several out there that pay a 10-11% dividend per year, depending on the price you pay per share. They are traded on the open market just like stocks, so the price per share is subject to market influences. The dividend, however, is subject only to the performance of the company. Most energy trusts are going to be okay for quiet some time, but get someone who knows how to evaluate companies (or learn yourself) to help you out in determining which one if you decide to go this route.


Disclaimer... I am not an investing guru. I know just enough to be dangerous. I do attest that the gist of the above explanation is accurate, though there may be some details missing and/or slightly innacurate. I highly recommend going to fool.com and other sights to learn more.

[ZX2guy19]

Awesome, thanks man. I plan on putting 1k to start with, and $100/month into it. So, about another $1000 a year. Obviously once I graduate from college I'll put a lot more into it.

What are the restrictions on an index fund? When can I pull the money? I was thinking of a ROTH IRA too, because the money can be pulled for one exception, and that is a down payment on your first house, which is what I want this for.

[Chuckiec09]

Another option you may want to look into is a form of stock called an ETF (energy trust fund). There are several out there that pay a 10-11% dividend per year, depending on the price you pay per share. They are traded on the open market just like stocks, so the price per share is subject to market influences. The dividend, however, is subject only to the performance of the company. Most energy trusts are going to be okay for quiet some time, but get someone who knows how to evaluate companies (or learn yourself) to help you out in determining which one if you decide to go this route.


ETF = Exchange Traded Fund. Close though.

http://en.wikipedia.org/wiki/Exchange-traded_fund

I wouldn't quote this as gold, but it gives a decent overview on what an ETF is. We all know how reliable wikipedia can be sometimes.

[Chuckiec09]

If your goal is to research a specific type of mutual fund, I would suggest going to Yahoo finance and going to Investing then Mutual funds. You can view all mutual funds by name or category or screen by specific variables. This should give you an idea of how many mutual funds there really are in the world.

All funds are slightly different as to how much you need for a minimum initial deposit and each subsequent deposit after that. Some require you to keep your money in there for a minimum amount of time. Fees can vary greatly. I recommend putting money in No-Load funds as the fees are much lower, increasing the return. A "load" is an upfront sales fee when you buy or sell.

IRA's and other retirement accounts are a whole other beast that would take a long time to explain. Best bet for those is to check out investopedia.com or various bank websites to see how you can open one.

[ZX2guy19]

Thanks guys, I'm sure I'll have more questions when I get all the money!!

[5whiskey]

Chuckie, thanks for correcting me man. I don't like passing out bum scoop, so whenever I do please slap me around and put me in line.

Let me correct myself. When reading my post, I almost made it sound like index funds were free to invest in. That is wrong, they have fees also. The fees are generally (but not in every case) MUCH lower than a managed fund.

As for pulling money... Chuckie is right, many mutual funds have different rules. An index fund is technically a form of mutual fund, so they are subject to the rules placed by the funding company.

2 types of mutual funds:
1. Managed Funds
2. Index Funds

They both are subject to whatever withdrawel or minimum amount rules that the funding company chooses to impose. Chuckie gave good advice about researching the funds at yahoo finance. If you'll keep an eye out on this thread I'll post a link to some of the investing 101 tutorials I've found. I know LA times has a good one on their website. Also, many of the online brokerages have one (some better than others), along with motley fool.

There are some good deals in ETFs right now, but you seriously need to get someone with alot of experience in investing to help you sort through to find one right for you... if you go this route. I started out going at it by myself... it didn't take long to learn that there are some things I need help with. I didn't lose alot of money or anthing, I just learned that there were forces I didn't understand driving alot of what happens in the market. I get several free investing consults a year between USAA and my credit union. I make the best use of my time by screening through funds and stocks to take at least 6 or 8 with me to the consult. Once there, the advisor helps me look at everything and gives me several suggestions... sometimes suggesting something I haven't looked at yet. Just some FYI, you may want to see if your bank or credit union has anything like this. I know with your amount (I started with 1k too, so not knocking you) you can't afford to pay much in the way of loads and fees for advice, so maybe you can learn from the web and get a few free consults.

Hope this helps