Important Tips About Mutual Fund Investing

March 11, 2015 Posted by admin

Mutual fund investing has greatly increased over the past 40 years and has become one of the most popular type of investing anywhere, but there are still ways to lose your money if your not carefull. Investing in mutual funds is still a risky business. Alot of people are doing it. Hopefully these tips will help you with any concerns you might have.

A common criticism of mutual fund investing is there rate of return is not as high as index funds, which are not as popular have historically returned a higher investment than actively managed mutual funds.

Another common problem people have with mutual fund investing is the use of load funds. You have probably seen the phrase “no-load mutual fund”. No load type funds are preferred because load funds come loaded with fees. These fees can run anywhere from half of a percent up to 8.5 percent of however much money you chose to invest. In the investing world it is said that these fees are a conflict of intrest as they clearly benefit the individuals making the sale and hurt the investor. Load mutual funds also influence your broker to recommend funds that will increase his fee, and not your investment portfolio.

Many investors also find another conflict of intrest in the size of the mutual fund. Many companies that manage the mutual fund charge a fee of half a percent up to 2 and half percent of the total size of the funds assets. This fee has a way of causing the fund to spend more money on advertising than it actually needs. The managers get more people to invest so they can maximize there fees as much as possible.

There has also been scandal in the mutual fund market. In 2003 there was a scandal that involved the practice of uunethical and dishonest trding practices. There were funds that were involved in late trading and market trimming, which are both illegal. You really don’t want to invest in a mutual fund that is engaged in that type of activity.

Investing in mutual funds is increasing in popularity day by day, inspite of a few bad eggs. They can’t ruin it for everyone. Just remember to enter any type of investing with you eyes wide open, and if you fine your fund is running improperly, there are authorities that you can report them to.

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