Welcome Guest. Register Now!  



Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 11-05-2007, 11:18 AM
Junior Member
 
Join Date: Jan 2007
Posts: 13
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!



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #2 (permalink)  
Old 11-09-2007, 12:01 PM
Junior Member
 
Join Date: Jan 2007
Posts: 9
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.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #3 (permalink)  
Old 11-09-2007, 12:03 PM
Junior Member
 
Join Date: Jan 2007
Posts: 14
Also, dont forget dollar cost averaging!

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



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #4 (permalink)  
Old 11-09-2007, 12:09 PM
Junior Member
 
Join Date: Mar 2007
Posts: 11
I suppose it is good time to sell your losers before end of tax year, at least you can take the capital tax losses.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #5 (permalink)  
Old 11-09-2007, 04:56 PM
Junior Member
 
Join Date: Jan 2007
Posts: 9
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.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #6 (permalink)  
Old 11-09-2007, 07:34 PM
Junior Member
 
Join Date: Jan 2007
Posts: 14
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!



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #7 (permalink)  
Old 11-12-2007, 10:54 AM
Junior Member
 
Join Date: Jan 2007
Posts: 13
Thanks guys!



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #8 (permalink)  
Old 11-20-2007, 12:07 AM
TaxGuru's Avatar
Tax Guru
 
Join Date: Jan 2007
Location: New Jersey, USA
Posts: 2,417
Blog Entries: 3
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!

__________________
Find a CPA near you!

Ask TaxGuru Please refer to the legal disclaimer.

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


Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
Ads
Reply


Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 
Individual
 » Income
 » IRA/Sep
 » Medical
 
Corporations
 » Payroll
 
Forum for CPAs
 
Financial Planning
 
 
 

» Recent Tax Q&A
No Threads to Display.