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The top 5 mutual funds secrets that you must know – Part 2
As index funds are not run by managers, you pay much less on expenses. Mutual funds average around 1.5% in expenses, whilst index funds average no more than 0.2%
This difference might not seem so great to start with, but it really adds up over a long period of time. If, for instance, you have invested $10,000. Half goes into a mutual fund with a 1.5% expense ratio, and the other half is put into an index fund with an expense ratio of 0.3%. Twenty years later, you will have paid more than $29,000 more in the mutual fund.
Famous investors have had the following to say on the subject: the famous stock picker Peter Lynch said that most investors would be better off if they invested in a index fund, and Warren Buffett said that index funds are the best way to buy into common stocks. Clearly, in the Mutual fundsvs index funds debate, index funds win it.
Secret number 3 – No loads mutual funds are really worth it: most investors, when they really look, can find a no load that is as good or better than the load fund. Paying a load gets you nowhere. Don’t do it!
Secret number 4 – Small mutuals on total assets are better for high returns, and the manager is typically more motivated.
Secret number 5 – Research into the manager! The good mutual fund managers constantly visit the factories, communicate with the competition, visit trade shows etc. They do much more than review data provided by news services.
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The information supplied in this article is not to be considered as medical advice and is for educational purposes only.
|Mutual Funds Investment7 Dec 2010|