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Old 11-05-2007, 11:18 AM
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Are Mutual Funds an efficient and effective method of long term investing?

Do you think that mutual funds are the most efficient investment strategy for long term investors?

Also, can you suggest some resources to determine how one can go about selecting mutual funds?

Thanks!



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Old 11-09-2007, 12:01 PM
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Mutual funds are also expensive, you have to understand the fees and management charges and deferred sales charges.

But, for novice investors I would first consider investing in mutual funds. Lots of research is avaiable on mutual funds. Check out the mutual investment journals at your local barnes and noble or border bookstore..Go to the library and check out resources.

Get familiar with mutual funds costs, and read up on prior years performance for each fund.

This market correction is really vicious! Best to diversify through mutual funds.



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Old 11-09-2007, 12:03 PM
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Also, dont forget dollar cost averaging!

Steady and consistent and long term investment horizon will also be a superior strategy!



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Old 11-09-2007, 12:09 PM
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I suppose it is good time to sell your losers before end of tax year, at least you can take the capital tax losses.



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Old 11-09-2007, 04:56 PM
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Mutual Funds real due diligence and research!

Dont forget to carefully look at the charges and expense ratio's of mutual funds.

Clearly, any long term strategy generally yields a higher rate of return. In my experience, I invested 6,000 in Putnam Grwt and Putmam New Opp fund in 1992. These got clobbered during the tech down turns.. I am barely recovering my monies to date.

I have now tended to be a bit conversative and invest in diverified portfolio that have stocks with moderately priced P/E that also have dividend yield.

But, most importantly I think one should also research the Mutual Funds through MorningStar etc. Make sure the managers have good performance behind them as well.



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Old 11-09-2007, 07:34 PM
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Basics of Mutual Fund Investing

Here are some great sites that might help you to make better decisions regarding mutual fund investing and provide you with some basics on Mutual Funds.

Mutual Funds, Fund News, Screening and Selection - Forbes.com

Beginners Guide to Mutual Fund Investing

Advantages and Disadvantages of Mutual Funds


Good luck!



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Old 11-12-2007, 10:54 AM
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Thanks guys!



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Old 11-20-2007, 12:07 AM
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Are Mutual Funds an efficient and effective method of long term investing?

Efficiency of Mutual Fund Investing
Mutual funds offer an efficient method of investing in the sense that it will offer a more diversified strategy of long term investing.

It seems that average compounded rates of return are higher the longer the investor horizon. The investor needs to carefully understand market volatility though, don't be afraid of downturns, don't shy away from making adjustments based on your risk tolerance, always seek advise of a financial professional...Their knowledge of the industry and fund returns are very important!

In my 20 years of practice, I have personally seen many investors who have accumulated wealth in the stock market are those that have made regular and consistent investment in same amounts over long periods of time..

Mutual Fund Commission and Other Costs
As far as funds themselves are concerned, it is important to note that there are 3 classes of funds, and costs of the funds are either back-end loaded, or front end loaded! Class A has commission costs of 5-5.75%, with no surrender charges, Class B has 0% Commission Charge whereas it has cash surrender value of for up 6 years! Class C has 1% annual commission costs, but no cash surrender charges.

Mutual funds have marketing expenses, and management fees as well. Clearly, Class A funds have least management fees whereas Class B and Class C have the highest. If one intends to invest over 7 years it seems mathematically, that Class A would yield a higher rate of return than Class B or C.

Mutual fund salesman generally would be indifferent to what you fund class you choose, as the industry is very highly regulated, and nowadays, it is unlikely the investor is going to be doped anymore!

Tax Aspects of Mutual Funds:
If you invest in mutual funds avoid making significant investments in the months of November and December. Most of the mutual fund transactions take place around the tax year end, and so capital gains or redemptions take place around that time and investors generally who invest in the 4th quarter will experience a capital gain, of short term character and hence experience a higher tax rate!

Cost Basis Information
Mutual funds generally will keep track of the cost basis information. When dividends or capital gains are reinvested, the mutual funds generally will keep track of these reinvestments and will add to existing cost basis. This is very useful and efficient for the taxpayer for year-end record keeping or whenever he sells the funds.

Mutual fund investing is not the only financial strategy one should employ in their financial planning strategy, but it is a useful and important strategy. I also advise my clients to consult a financial planner who will devise a financial goal and strategy to map out a long term investment plan!

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Last edited by TaxGuru : 12-26-2007 at 11:16 AM.


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