Stocks versus Mutual Funds

The major part of a mutual fund is a portfolio of a wide range of stocks that are managed on behalf of the investors that buy into the fund. Mutual funds were created to give small investors to take advantage of a large, diversified portfolio without the need of large investments. The major advantage of a diversified portfolio is the increased protection against rapid market fluctuations of any one particular stock.

As mutual funds' portfolios are spread across 20 or more stocks, even if one of those stocks falls, the effect is much less than if the portfolio consisted of that one stock only. The main rule of investing is “diversify whenever it is possible”. Of course, it is a problem for small investors - they often lack the funds to buy a wide variety of stocks. And that's where mutual funds comes in, letting small investors to benefit from diversification only after investing a small amount of money.

Mutual funds can be made up of a variety of holdings, not only the stocks. Their portfolios might include also bonds or other money market instruments. Technically speaking, a mutual fund is a company and those who buy into it are in fact purchasing shares of that company. They can be bought either directly from the fund itself or from brokers acting on behalf of the fund. How do we redeem shares? That's simple – we sell them back to the fund (they have to buy them).

Most funds are run by investment professionals and analysts who decide which securities to include in the fund. However, there are also some non-managed funds, usually based on an index such as the S&P 500 or Dow Jones. Such funds simply duplicate the holdings of the index, so there is no need for analyses.

How do they work? For example, if the Dow Jones goes up by 5%, the mutual fund based on that index will also rise by 5%. Surprisingly, non-managed funds usually perform better than their managed counterparts.

So far so good, but there are also a few downsides. First, there are fees that must be paid regardless of how the fund performs. Then, the individual investor has nothing to say about which securities should be included in the fund. Lastly, the current value of a mutual fund remains unknown until it publishes its financial statement (twice a year).

Mutual funds are a good choice for the smaller or part-time investors, better than either stocks or bonds. For one, they provide investors with the diversity that lessen the shock caused by sudden stock market movements while usually outperforming bonds. Of course, it is possible for a mutual funds to lose value, though mainly in the short term. Investors interested in short-term transactions should rather turn their attention to bonds which offer a set rate of return.

Money market funds, bond funds and stock funds are three main types of mutual funds currently on market. Money market funds offer the lowest risk, but also the lowest return rate. Their portfolios consist only of high quality investments – for example, bonds issued by the US government and blue chip corporations.

Bond funds usually produce higher profit than money market funds, but they are also a little more risky. The reason is simple: all the risks associated with bonds – bankruptcy or falling interest rates – can also damage bond funds.

Stock funds are mutual funds with the greatest potential, but also carry the most risk. However, they are dangerous mostly for the short-term holders – stocks usually outperform other investments in the long run. There are two main types of stock funds - 'growth funds' that aim to maximize the gain and 'income funds' that concentrate on stocks that pay regular dividends.

Mutual funds are ideal investment instruments for everyone with limited funds or none investment experience. The choice between the funds is a decision on how much risk you want to take against the expected return rate.

To find out more about learn stock investing and stock trading strategies visit http://www.learn-stock-investing.info

Stocks versus Mutual Funds

The major part of a mutual fund is a portfolio of a wide range of stocks that are managed on behalf of the investors that buy into the fund. Mutual funds were created to give small investors to take advantage of a large, divers may have wondered why your mutual funds have been going down for the past 2 years. The answer is very simple, but not one you will hear from Wall Street as they want you to send money.

In order for stock mutual funds to go up you must have a bull market. Unfortunately, that bull ended 2 years ago and is probably not going to return for a long time. Yes, there will be short-term rallies that can last from weeks to months, but the downward spiral will continue. For the past 100 years the Price/Earnings ratio of the S&P500 index has a mean average of about 15. With the current P/E running about 41 the rubber band has been stretched too far and is now contracting toward a more realistic level. It will take a time, probably several years, for a true bottom to be reached.

Mutual fund charters require the fund manager to be fully invested at all times. The fund may be required to be invested in tech stocks, pharmaceuticals, automotive, Asia or some other specific category. If that particular sector is weak and almost all stocks therein are headed down the fund manager has nothing to buy and is not allowed to sell to put the money in cash or bonds to protect the investors. Some are allowed to buy and sell what they wish; others must invest in stocks of a particular index such as the Dow Jones, S&P 500 or the Nasdaq. Most of the fund managers today are too young to have experienced a bear market and do not know how or what to do.

The small investor today has been taught to believe that the stock market always goes up. From 1982 to 2000 it did, but that was the end. All the talking heads on radio and TV have been telling you to buy the breaks and that the market always comes back - except when it doesn't. Almost none of them has ever seen or even studied a major bear market. The last one was 1973-74 just about the time most of these guys were in grade school or high school. They haven't a clue and don't know when or how to sell.

Today there are trillions of dollars in 401Ks, IRAs, pension plans, etc. run by professional fund managers, financial planners, bankers, etc. who have no idea how to protect their investors. More trillions are getting ready to go down the drain. Last year 90% of stock mutual funds lost money. The Grim Reaper is now the manager of your mutual fund.

For the little guy, that's you, there is only one way to protect your money. If you are in one of those plans you can tell them you want to have your funds in a money market account. At least it won't go down. If there are any fixed income or bond funds available to your account that is another safe venue.

Mutual funds are no longer a good long-term investment. The age of the stock mutual fund is over. Dead. Don't let your hard-earned money get away.

Al Thomas' best selling book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter to receive his market letter for 3 months at www.mutualfundmagic.com to discover why he's the man that Wall Street does not want you to know.

Comments to al@mutualfundmagic.com

Copyright Albert W. Thomas All rights reserved.

Mutual Funds are Dead

You may have wondered why your mutual funds have been going down for the past 2 years. The answer is very simple, but not one you will hear from Wall Street as they want you to send money.

In order for stock mutual funds to go up you must have a bull market. Unfortunately, that bull ended 2 years ago and is probably not going to return for a long time. Yes, there will be short-term rallies that can last from weeks to months, but the downward spiral will continue. For the past 100 years the Price/Earnings ratio of the S&P500 index has a mean average of about 15. With the current P/E running about 41 the rubber band has been stretched too far and is now contracting toward a more realistic level. It will take a time, probably several years, for a true bottom to be reached.

Mutual fund charters require the fund manager to be fully invested at all times. The fund may be required to be invested in tech stocks, pharmaceuticals, automotive, Asia or some other specific category. If that particular sector is weak and almost all stocks therein are headed down the fund manager has nothing to buy and is not allowed to sell to put the money in cash or bonds to protect the investors. Some are allowed to buy and sell what they wish; others must invest in stocks of a particular index such as the Dow Jones, S&P 500 or the Nasdaq. Most of the fund managers today are too young to have experienced a bear market and do not know how or what to do.

The small investor today has been taught to believe that the stock market always goes up. From 1982 to 2000 it did, but that was the end. All the talking heads on radio and TV have been telling you to buy the breaks and that the market always comes back - except when it doesn't. Almost none of them has ever seen or even studied a major bear market. The last one was 1973-74 just about the time most of these guys were in grade school or high school. They haven't a clue and don't know when or how to sell.

Today there are trillions of dollars in 401Ks, IRAs, pension plans, etc. run by professional fund managers, financial planners, bankers, etc. who have no idea how to protect their investors. More trillions are getting ready to go down the drain. Last year 90% of stock mutual funds lost money. The Grim Reaper is now the manager of your mutual fund.

For the little guy, that's you, there is only one way to protect your money. If you are in one of those plans you can tell them you want to have your funds in a money market account. At least it won't go down. If there are any fixed income or bond funds available to your account that is another safe venue.

Mutual funds are no longer a good long-term investment. The age of the stock mutual fund is over. Dead. Don't let your hard-earned money get away.

Al Thomas' best selling book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter to receive his market letter for 3 months at www.mutualfundmagic.com to discover why he's the man that Wall Street does not want you to know.

Comments to al@mutualfundmagic.com

Copyright Albert W. Thomas All rights reserved.

Investing in Mutual Funds Online

Are you thinking of investing some money? There are thousands of different mutual funds that you can start investing your money in, but the question is how do you pick the best one to fit what you are looking for? Or maybe you’re wondering if investing in mutual funds online is the right thing for you to do.

When you are setting up an account over the internet with your online broker, you must first meet three important requirements. Your computer must be able to connect to the internet, your web browser must be at least 128-bit compatible such as Netscape 3.0 or Internet Explorer 3.0 or higher, and you must have at least a small amount of money if not more to start. Some online brokers require that you have as much as $1,000 or the equivalent in securities to open an account.

When investing in mutual funds, you should check around for different accounts that may be available. Some require you to place cash up front and others may not require any cash to open the account. You should do an extensive detailed search to find an account that fits your needs as well as your bank account. Your best research tool is the World Wide Web and it is right at your finger tips 24 hours a day, seven days a week.

Investing in mutual funds online are always subject fees and this can be a tricky subject. Brokers charge fees and these can widely differ depending on the broker you choose to go with. Always read the fine print with anything dealing with money exchanging hands. There could be hidden fees or fees for changing funds that are within the same fund family. Some brokers don’t charge any fees and these may be the ones you should look into. There are websites like http://www.globefund.com that can provide you with daily, monthly and historical mutual fund data. You can also view the performance charts of a particular fund and compare funds against each other. This is an easy way to find the one that is best for you.

James Hunt has spent 15 years as a professional writer and researcher covering stories that cover a whole spectrum of interest. Read more at http://www.best-for-mutual-funds.info

 

Money Market Mutual Funds

“I don't want to be left behind. In fact, I want to be here before the action starts.” -Kerry Packer

Money market mutual funds are a great alternative, for the less affluent investors, to Treasury bills and certificates of deposits. This is because money market mutual funds require less money to be paid out up front. Treasury bills often require thousands of dollars to begin investing. Money market mutual funds are extremely popular, due in part because of their liquidity. This type of fund acts much like a savings account.

Future investors can allow their money to accumulate in a money market mutual fund until there is enough money available to invest in stocks, bonds, and regular mutual funds. Money market funds can be seen a building block for a new investor on his way to creating an investment portfolio. An investor can easily place more money into this fund or remove money when it is needed. There is no paperwork, additional fees, or commissions to a financial advisor.

Money market mutual funds are a great place to rollover investments while trying to decide on your next financial move. For example, if you have stock in a company that is going belly up and you decide to sell, you can place your money in this type of mutual fund until you decide what you will ultimately do with profits.

Another great benefit is that money market mutual funds have a higher rate of interest then a normal savings account. A normal savings account may have a rate of return that is well under 1% however, money markets have an average interest rate of 4.5%. Over a couple of years time, this can create a nice profit to pay for a vacation or to reinvest.

Traditional money market accounts usually need an original investment of at least $5000 dollars however a money market mutual fund can be opened with just $500 dollars and does not require the use of financial advisor or brokerage firm. They can be purchased through a local bank. Banks will often supply a financial manager, for free, that can answer some basic investing questions and even offer advice and direction in building your financial freedom.

Money market mutual funds like equity mutual funds have given options to the small and casual investors. These money market funds are extremely safe, low risk, and offer liquidity. In addition, money market accounts can actually be tax exempt and can a good way to save money without having to pay federal, state, and local taxes on it.

Visit the Global Investment Institute and signup for our free Investing For Beginners E-Course at http://www.Global-Investment-Institute.com

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