No matter how much money you have investing in mutual funds can be a daunting experience when starting out. There are tens of thousands of funds available to choose from. A visit to a professional financial planner for the person who is completely unknowledgeable about investing would be a good place to begin. There are, as well, many resources online to help a person define what kind of investor they are which can help guide your initial thinking.
But, before choosing any one or two funds to invest in, it is important to consider the tax implications for investing. Generally speaking, mutual fund investments are long-term affairs, so putting the invested funds in a tax-deferred retirement account of some form is a good idea. Tax laws vary by country, so it is up to you to decide what your best course of action is. A visit with a local financial consultant I recommended.
Many mutual funds have a minimum amount to open a position with them. $2500 is a common minimum investment. Some companies will waive their minimum initial investment if you agree to regular monthly contributions to the fund. T Rowe Price, for example, has mutual funds with a $1000 minimum that they will waive for a minimum $50 per month regular contribution.
Once you have narrowed down the field to a number of funds that fit your investing profile one can easily begin doing comparison shopping. Morningstar makes their business rating and comparing mutual funds of all shapes and sizes assessing a fund?s strengths along a variety of factors: Rate of Return, Expenses, Total Assets, NAV, etc.
Even though investing in mutual funds creates instant diversity for your portfolio, it does not ensure success. As many funds are sector-specific as the economics of that sector change so will the performance of the fund. So it is important to review your funds? performance relative to an index that most closely tracks the funds asset. For example, if you are invested in oil services mutual funds comparing the performance of the fund versus the XOI index will tell you whether the fund is outperforming the general market or not.
The mutual funds manager?s goal is to always beat the passive rate of return of the general market, generally the S&P 500, in the U.S. That is their first line of advertising. This is fine if you are investing in an Big Cap Equity Fund, but not applicable to a real estate fund. Looking beyond that to the mutual funds performance vis a vis the sector the fund is a proxy for will tell you just how up to speed the management of the fund is with current events in their area of expertise.
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About Pete Southern
Pete is an active investor with knowledge of all sectors but his first love are IPO's. A failed day trader who now understands research. A love of economics and writing seen Pete begin to publish content for various finance blogs. Our main editor and collator of contributions, he is your point of contact via editorial at stockpricetoday.comSource: http://www.stockpricetoday.com/mutual-funds/investing-in-mutual-funds-for-growth/
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