| The best time to invest in mutual funds is NOW. | | | | agrees and announces that he just lost 50% in his |
| These investment packages do not go in and out | | | | funds. |
| of favor like stocks or gold or other investments | | | | After hearing this exchange of opinions, you |
| do. They have been the investment of choice for | | | | decide not to invest in mutual funds, at least not |
| everyday investors for a good 40 years, because | | | | now. You plan to keep your money in the bank |
| they offer investors a wide array of | | | | until you learn how to invest. |
| opportunities...in good times and bad. | | | | Now, here's the rest of the story. Jack's financial |
| Mutual funds are not an investment type or class | | | | planner put all $100,000 into stock funds, because |
| like stocks and bonds, they are a way to invest in | | | | Jack already had money in annuities and bond |
| stocks and bonds. In fact, they are the simplest | | | | funds, and wanted higher returns. The financial |
| and best way for most folks to do so. When you | | | | crisis of 2008 and early 2009 sent stock prices in |
| invest in mutual funds, professional money | | | | general down about 50%. Jack owned a variety |
| managers manage a portfolio of stocks and/or | | | | of stock funds, and lost about 50% as well. |
| bonds and/or money market securities for you. | | | | Stocks were the bad investment, not mutual |
| You simply own shares in a large collection of | | | | funds. Had Jack been in bond funds or money |
| investments. | | | | market funds, he'd not taken those losses. |
| The cost to you varies, but often amounts to | | | | Mike must have been in stock funds as well. Either |
| about 1% a year for expenses, maybe 2% for | | | | that, or he was repeating something he'd heard at |
| stock funds. You don't pay these costs directly to | | | | another party. Now is always a good time to |
| the fund company. These expenses are just | | | | invest in mutual funds, if you know how to select |
| deducted from the fund's assets. | | | | funds that are appropriate to your needs. Better |
| Now, you might hear someone say that their | | | | yet, learn how to invest and put together a |
| mutual funds have been bad investments. Take | | | | balanced portfolio of mutual funds. |
| such statements with a grain of salt. There are | | | | The alternative is to manage your own |
| some losers out there, and some funds charge | | | | investment portfolio of individual stocks and |
| more than others for expenses. That having been | | | | bonds. This is out of the question for folks who |
| said, statements like this are usually based on a | | | | have not the knowledge, experience nor inclination |
| misunderstanding of the nature of the investment. | | | | to do so. |
| I'll illustrate with a short story. | | | | When you invest in mutual funds, professionals |
| In late 2007, Jack rolled $100,000 into an IRA, | | | | deal with the investment selection and timing |
| where his advisor had him invest in mutual funds. | | | | issues for you. They manage the investment |
| In March of 2009, you and some friends at an | | | | portfolio, and it's all wrapped up in a package called |
| informal get-together are discussing how to | | | | a mutual fund. You need only pick the package(s) |
| invest, and Jack gives his opinion. "Don't invest in | | | | that's right for you. Now is always a good time to |
| mutual funds, they are bad investments", he says. | | | | shop for mutual funds, and a good time to learn |
| His friend Mike adds, "now is not a good time to | | | | how to invest in them. |
| invest in mutual funds, I just lost my shirt". Jack | | | | |