| For people who don't have the time and
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| | Don't pay a load. Loads, or sales fees,
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| expertise to research and track
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| | come straight out of your investment.
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| individual stocks--which includes most of
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| | There's no evidence that load funds
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| us--mutual funds are one of the best
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| | perform any better than no-load funds, so
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| possible ways to invest. And a lot of
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| | keep your money and stick with the
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| other investors agree--the Investment
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| | no-loads.
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| Company Institute, the trade group for
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| | Don't overlap. Funds are themselves a
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| the mutual fund industry, says that
| |
| | diversified investment, but don't think
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| Americans have nearly $7 trillion stashed
| |
| | that owning a lot of funds means that
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| away in mutual funds.
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| | you'll be even more diversified.
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| But there are thousands of fund choices,
| |
| | Instead, you may end up with many funds
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| so it's very important to sort out the
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| | that own the same stocks. You should be
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| weak from the chaff. We recently asked
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| | able to achieve adequate diversification
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| the Armchair Millionaire community for
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| | with as few as two or three funds that
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| its advice on what to look for when
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| | target different areas of the overall
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| shopping for a fund. They offered us this
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| | stock market.
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| battle-tested wisdom: Check out the
| |
| | Don't chase performance. Last year's hot
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| management. "I look for long-term
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| | fund can be this year's laggard. Making
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| management. I want my fund managers to
| |
| | your fund choices based on recent
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| have been in their jobs for a long
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| | performance has historically been a
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| time--at least seven years." --Cole
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| | losing proposition. Look for long term
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| Consider fees. "I look at the fees first.
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| | histories through a variety of market
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| Just because a fund charges higher fees
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| | conditions such as bull markets, bear
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| doesn't mean that it is well managed. If
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| | markets, recessions and periods of
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| a fund has above-average fees, I skip
| |
| | economic growth.
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| it." --ACF Compare returns to a
| |
| | Don't trade in and out of funds. Trying
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| benchmark. "The past performance of a
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| | to time your investment and switching
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| fund alone is meaningless. You have to
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| | frequently between funds is pointless.
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| compare it to how the market overall has
| |
| | You invest in funds to leave the trading
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| done. I always compare large cap funds to
| |
| | up to a professional, so leave your money
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| the S&P 500 index and small cap funds to
| |
| | in your funds long enough for the
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| the Russell 2000." --James49 Watch the
| |
| | portfolio managers to do their jobs.
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| tax impact. "I want my money managed for
| |
| | THE BOTTOM LINE: All mutual funds are not
|
| the least taxable exposure.
| |
| | created equal. When you choose a mutual
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| I expect my fund managers to be able to
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| | fund, you're really choosing a person or
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| manage the fund for maximum tax
| |
| | a team to manage your money.
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| efficiency." --Presto It's also important
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| | Use common sense and make sure to get
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| to know what not to do when choosing a
| |
| | objective advice before you make a
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| fund. Use my checklist to avoid the most
| |
| | purchase.
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| common mutual fund mistakes.
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| |
|
