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