With over 6,000 mutual funds available, it may be tempting to pick funds from a popular star or index rating system. Savvy investors, however, balance multiple factors in their selection process. Ratings represent only the historical performance of funds and cannot predict the future. Performance consistency, management skill, and expense limitations are among the many factors that influence a fund?s prospects.
But, most people who ?invest? don?t study the market. They don?t understand it, and they don?t have time to manage their portfolio wisely. That?s where mutual funds come in. I respect that other people have other opinions, and certainly not all mutual funds are well managed ? you MUST choose wisely and use appropriate caution! But, for most folks, a good, solid, boring mutual fund is the golden path to riches.
Index funds that track any of the major indexes are just taking advantage of the concept of diversification. The only remaining risk is whether the entire market goes up or goes down and one can switch to a fund that is designed to profit from a down market when such action is called for.
But here is the key point: When you accrue hotel points or intend to use some promotion toward free nights, make the most of what they offer! Just as you would use those free nights you earn only at hotels which might otherwise be out of your budget, redeem your frequent flyer miles for the most expensive air tickets in business or first class.
If there is an interest there is a class for it. And now that there's the internet taking a class is just as easy as leisurely clicking a link. There are many available classes that are free, or via email and some that may cost a bill or two to enter a site. Or if you'd prefer, take a class at local colleges or universities which offer that immediate one on one support available through that type of arrangement. Your local library or museum may schedule classes or speakers covering a variety of subjects, too. Some locations even award certificates after completion if that is your requirement.
When calculating your basis after selling a mutual fund, it's easy to forget to factor in the dividends and capital gains distributions you reinvested in the fund. The IRS considers these distributions as taxable earnings in the year they are made. As a result, you have already paid taxes on them. By failing to add these distributions to your basis, you will end up reporting a larger gain than you received from the sale, and ultimately paying more in taxes than necessary.
While money-market funds are safe, their yields are so low they hardly qualify as investments. In fact, the average seven-day yield on money-market funds is just 0.70 percent. Since the average management fee for these funds is 0.60 percent, it does not take a genius to see that putting your capital in a money-market fund is only slightly better than stashing it under your mattress. But, because the yields on money-market funds track changes in market rates with only a short lag, these funds could be yielding substantially more than 0.70 percent by the end of the year if the Federal Reserve continues to hike rates as expected.
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