According to Investopedia.com, a website owned by Forbes, there are presently more than 10,000 mutual funds in North America. There are actively managed funds which have fund managers that select what stocks to buy and sell and there are also funds, termed index funds which invest in a basket of stocks with the goal of replicating the performance of a broad market index such as the S&P 500 or Dow Jones Industrial Average. An investor in an index fund can expect returns close to the annual performance of the index that the fund seeks to duplicate.
Index Fund Mutual Funds Versus Managed Funds
One of the major benefits of index funds is that the management fees are much lower than for actively managed funds and this can result in substantial savings for investors over the long-term. While there are some exceptionally talented fund managers with great track records, many financial experts believe that index funds generally outperform actively managed funds. According to Princeton University's Burton Malkiel, the average actively managed mutual fund has returned 1.8% per year less than the S&P 500. Investing in an index fund then that seeks to mimic the S&P 500 could very likely be more profitable than investing in many of the actively managed funds.
Mutual Fund Research Resources
There are many index funds and mutual fund companies offering these types of funds to choose from. The Internet offers a wealth of financial market information sites that will provide the information to prospective investors on the funds available. One such site is Yahoo Finance. The site features a page devoted to mutual funds that provides useful mutual fund research tools like a fund screener and mutual funds investing information like listings of top funds performance and contact information for mutual fund companies. Following the links to the websites of mutual fund companies allows investors to obtain prospectuses and learn more about fund performance, minimum investments and how to invest in the fund.
Asset Management Beyond Index Fund Mutual Funds
Once an investor has watched the value of his portfolio approach about $10,000, he should then consider expanding his portfolio by acquiring shares of other types of securities. This might be accomplished through the purchase of other, different types of mutual funds or by purchasing individual shares of stock. This helps to build a broader portfolio.
With all of the information available on investing and all of the choices in investment products and strategies, it can seem a little overwhelming. However, taking the time to research investments like mutual funds can easily put anyone in the position of getting their financial ducks in a row. A good first step in reaching important long-term financial goals can be as simple as taking advantage of the simplicity of investing in index fund mutual funds. Low management fees and predictable performance make them a wise choice for investors.
Larry Darter - Larry Darter is a freelance writer and published author with three books to his credit. He is a graduate of the Univ. of Central ...
