Tradersí Resource: Mutual Funds
When investing with mutual funds, the issue is cost of all kinds. Sales charges, turnover costs (trading costs), tax costs, management fees, marketing costs, and cash-holding costs all eat into your returns; then the compounding effect magnifies your losses. Itís critical to consider all of these costs when approaching mutual fund investing and do the appropriate research to make sure you are making the most of your investment. A
family of low-cost, no-load funds that allows costless switching between funds can be very beneficial in the long run.
After youíve minimized costs, you can look at returns. The benchmarks for returns are usually index funds that mirror one of the market indices, such as the S&P 500. Itís a challenge for actively managed funds to beat the returns of the benchmarks, especially when you take into account the costs of active management, so consider these index funds in your research.
Finally, consider balancing your portfolio between bonds or money market funds and equity funds. A mix of bond funds and equity funds is best for all but the youngest investor. This portfolio diversification will help limit your risk while still allowing for respectable returns.
This listing provides a sampling of the types of mutual funds available and some of the costs associated with them.