Read about my successes and failures. Learn from my experiences and gain insight without losing any cash!!!
Lesson: Catching a Falling Knife
Lesson: Currency Exchange
Lesson: Mutual Fund
Lesson: Paid to Wait
Lesson: Pricing in a Downturn
This is where you’ll find find my Blog. I will comment on the latest news relating to investing, real estate, and the financial markets.
There are many pros and cons to buying mutual funds, and I have owned them before, sold them to self direct my investing and would consider buying them again.
Mutual funds, are great for many people who want to invest but either don’t have the time to manage a portfolio or don’t feel comfortable making individual investments on their own. How can you manage your mutual funds if you don’t have time? Manage your manager. I would suggest having at least two different mutual funds with two different managers (or people that you can go talk to). Let them know that you have money with another person and that you are willing to invest future funds with either one of them, and you are also not adverse to pulling money out of one to put in another. This will let them know that you are monitoring their performance and that you are willing to reward results. An easy way of keeping track of your mutual funds, is to plot the results in an excel spreadsheet when you receive each statement which will act as an easy record of your growth over time. If you are comfortable with the software you can also graph the results which give a very easily identifiable representation of performance. I was given a great piece of advice from a fellow investor: "I go to each of my fund advisors and listen to what they are recommending me to buy, when both of them agree on the same thing I buy through both of them".
Mutual funds are usually very diversified, owning many different individual stocks and securities within them. This can be a pro for people who are risk adverse and want to spread their risk out among many items. This can also be a con as it will likely limit your potential gains as the percentage held of one item is usually very low. Mutual funds that specialize in an area, for example biotech, or emerging markets, are a great way to get exposure to a specific asset class that you might not have technical expertise in but think you would like to be invested in. Take this route if you want to let people who invest in this area call the shots, and you can hopefully reap the rewards.
The MER is something to consider with all of the mutual funds that you buy. This is the Management Expense Ratio, and is the fee that management of the mutual fund charges to run the fund. These fees range from almost nothing to high fees for funds with very active management, or hedge funds. In essence, this is the price that you are paying for someone to manage your investments for you. These fees can be avoided if you invest in companies’ common stock on your own (known as self directed), or purchase index funds, which can have low to no MERs, as they track the performance of the stock market (known as passive investing). Investing in these funds can be a great way to invest long term for retirement. Purchasing units in an index fund each month gives you diversification to own the entire stock market, and you dollar-cost-average your holdings over time. Considering that the overall performance of the stock market averages approximately 7% per year, over the long run, you should be accumulating wealth over time.