| There are many companies ready to sell you | | | | purchase mutual funds. Many discount brokers |
| mutual funds, but due to a wide variety of | | | | will offer access to hundreds or thousands of |
| fee structures, some companies are better | | | | mutual funds at no cost (no transaction fee). |
| suited to sell you mutual funds than others. | | | | Though you can buy mutual funds directly with |
| | | | the fund companies, some people prefer |
| Before digging in to this subject, I highly | | | | discount brokers because they help simplify |
| recommend you read Before you buy mutual | | | | bookkeeping and are more up on technology |
| funds for more tips on what to look for when | | | | than some of the smaller fund companies. |
| buying mutual funds. | | | | |
| | | | Mutual Fund Companies The best way to buy |
| Let’s take a look at who wants to sell | | | | mutual funds is to go straight to the source. |
| you mutual funds and what their motives and | | | | By investing directly with the mutual fund |
| fees are: Insurance Companies Insurance | | | | companies, you can do so without transaction |
| companies are a dangerous place to buy mutual | | | | costs. Fund companies have no hidden agendas |
| funds. They love using the words "mutual | | | | – they are there to serve their |
| funds" because people trust mutual funds and | | | | customers, the mutual fund shareholders. |
| it is a known product. The problem is that | | | | |
| they prefer to sell and they like to wrap | | | | Why are you buying this fund? Is it because |
| mutual funds into other products like | | | | you read about it in the paper or a neighbor |
| variable annuities – often taking away | | | | told you about it? Don't get caught in the |
| the advantages that mutual funds offer (like | | | | trap of chasing performance. Buy a fund |
| liquidity. | | | | because it meets an objective in your |
| | | | portfolio, not because it has done well |
| Mutual FundsGuide to Mutual Funds. Get the | | | | recently. Asset allocation is the key to |
| info you need.Guide2Biz.com Insurance | | | | successful investing. |
| salesmen are after the commissions they | | | | |
| receive when selling funds, which is why you | | | | Returns or Performance Don't focus too much |
| won’t find insurance salesmen selling | | | | on returns. Any track record under 5 years is |
| no-load funds. | | | | noise. Try to take a look at how a fund has |
| | | | done over longer periods of time and try to |
| Banks Banks are great places for some | | | | compare it to it peers or an index that |
| products, but not mutual funds. Banks, too, | | | | represents the type of asset class the fund |
| love selling funds of the loaded variety - | | | | is in. It is not fair to compare a government |
| but rarely offer much variety (only one or | | | | bond fund to the NASDAQ. |
| two fund families). They, too, receive | | | | |
| commissions. Banks are also known for having | | | | Risk Take a look at the standard deviation of |
| very limited or incorrect information about | | | | a fund. If Fund A did slightly better than |
| the mutual funds they sell. A study by | | | | Fund B, but took twice as much risk as Fund |
| Consumer Reports concluded that the odds of | | | | A, then Fund B would be the better choice. |
| getting good advice at the bank about funds | | | | Other measures of risk include the Ulcer |
| was worse than one in six (the sales people | | | | Index and the worst periods (ex. 1-month, |
| weren’t even asking the right | | | | 3-month, one year). Don't take any risk that |
| questions and often gave wildly wrong | | | | you are not comfortable with and never take |
| answers). | | | | What firm serves as the fund's adviser and |
| | | | who manages the fund? It might not be a bad |
| Stock Brokers and Investment Advisors These | | | | idea to do some background checking to make |
| two groups are a little trickier. | | | | sure it is a decent entity. The SEC is the |
| | | | official watchdog for mutual funds and has |
| Some want to sell you loaded funds for a | | | | information about each fund and it's manager. |
| commission, others collect fees for advice | | | | Also look out for recent manager changes. |
| while selling no-load funds and others charge | | | | |
| a percentage of assets under management. | | | | Though a new fund manager may be just as good |
| Generally these companies are good for | | | | or better, it is important to realize that |
| advice, but if you are a do-it-yourselfer the | | | | all the fund statistics from before may not |
| next two choices are much better for you. | | | | be relevant, especially in an actively |
| | | | managed fund. |
| Discount Stock Brokers This is a great way to | | | | |