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Mutual Funds
MUTUAL FUND QUOTES & RESARCH
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A Mutual fund is a diversified portfolio of securities into which investors pool their monies. The portfolio is professionally managed and the shares are redeemable at their Net Asset Value (NAV). The biggest advantage to mutual funds is diversification = A mutual fund invests in the stocks of many companies. By purchasing a mutual fund, you are assuming less risk than if you put your money into a single stock . Mutual funds may specialize in certain securities or certain industries (such as technology stocks) These specialized funds are called "sector funds". Mutual funds have no maturity dates, and customers can choose to reinvest their dividends and capital gains in the fund.
A load is a sales charge that is imposed when purchasing (or in some cases, selling) shares of some open-end mutual funds. This charge can be as high as 4.75%. The load can be charged at the time of purchase( a "front end load") or at the time of sale (a "back end load"). Many top performing funds do not charge a load. The cost of running the fund are met by an "Annual Operating Expense Ratio". This is not a sales charge, but is built in the the price of the shares.
The S&P 500 is the index by which mutual fund performance is measured.
Over the past 20 years, the stocks that make up the index have returned an average of 11% a year. This includes a number of crashes that occured during that time. Thanks to an unprecidented Bull Market, the index has gained an average of 20% a year for the past 5 years. How can one buy all 500 of those stocks? Easy - buy an index fund. Not only do you enjoy the element of diversification, but you will never make less than "The Market" does in any given year. Another point to consider is the tax efficiency of an index fund. Because trading within the fund is kept to a minimum, your capital gains consequence will be negligable. The Vangard Index Trust 500 (ticker symbol VFINX) and the Schwab S&P 500 (ticker symbol SWPIX) are just 2 of the many (no load) funds that track the performance of the Standard & Poors 500. Index funds are a fast, easy way to invest - Plus, this method has a proven track record. Unlike other funds that are actively managed (traded) by fund managers, an index fund is pure logic. To put it in broker terms: "It ain't rocket science." Use the mutual fund search engine at the top of the page to compare returns and weight them against the alternatives.
"Beating the Index" is a phrase that brings out the salivating monster in all of us (ourselves included). Before you run to the first fund that claims to have beaten the index this year, consider this: Only 10% of all managed funds beat the S&P 500 index in any given year. And guess what else: It's not the same funds every year. This years wonderfund may be a dog next year. Always look at the entire history of a fund, not just this years returns. If you are truly intent on beating the index, and you have the discipline to adhere to a long term strategy, take a look at the "Dogs of the Dow" portfolio outlined in the "STOCK" section of this guide.
Disclaimer: All research is provided by third party analysts. CC Market Track has not reviewed, and in no way endorses the validity of such data. CC Market Track shall not be liable for any actions taken in reliance thereon. This material is for informational purposes only, and in no way constitutes a recommendation of any kind.
