Tips on buying mutual funds

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