CAN invest money and get good investment management quite cheap. Some rich folks pay over 2% per year plus 20% of profits to invest money with famous brands hedge funds, with no performance guarantees. On the other hand, average investors can invest and get good investment management at an annually cost of significantly less than 25 cents per $100 they invest while enjoying other advantages in 2011 and beyond.
A few of the rich and famous have paid handsomely for investment management and wound up broke. They are extreme cases when people aimc trusted someone blindly, which can be never recommended whenever you invest money. In the event that you invest in the proper places you have government regulation and visibility on your own side. Plus, there ought to be no surprises on the performance front; with downright inexpensive and good investment management working for you. Welcome to the world of mutual funds, specifically no-load INDEX funds.
Here’s how not to invest for 2011 and beyond: offer a money manager total freedom to invest your hard earned money wherever he sees opportunity. No investment management outfit is adequate to win consistently speculating in the stocks vs. bonds vs. currencies, commodities or whatever game. You’re better off if you invest profit a number of mutual funds and diversify both within and across the asset classes: stocks, bonds, money market securities and specialty areas like gold and real estate. But be mindful here too, because in ACTVELY managed funds you may pay 2% per year and still not get good investment management.
Most actively managed funds neglect to beat their benchmarks (which are indexes), at least simply as a result of expenses that are extracted from fund assets to pay for such things as active management. Plus, fund performance could be packed with surprises from year to year as management tries to beat their benchmark, an index. Index funds don’t pay big bucks to money managers to play this game. They simply track or duplicate the index. Let’s use stocks as an example, and claim that you wish to invest profit a diversified portfolio of the largest best-known stocks in America, with no surprises.
Spend money on an S&P 500 index fund, and you automatically own a very small bit of 500 of America’s biggest and best companies. The S&P 500 Index is in the headlines every business day, and the names of the 500 companies are public knowledge and can easily be on the internet. This index can also be the benchmark that most stock fund managers try, and usually fail, to beat on a regular basis. Is this your notion of good investment management? I’d rather just invest profit the index fund for 2011 and beyond and realize that I’ll haven’t any big surprises in good years or bad.
Don’t overlook the fee whenever you invest money. Index funds are not an issue in money market funds, where the major fund companies have kept costs low simply to compete for investor dollars. But for equity (stock) and bond funds, where they make their profits, you are able to pay 10 times the maximum amount of whenever you invest in actively managed funds vs. index funds, and still not get good consistent investment management. Do you really need to check far and wide to locate a place where you can invest in stock and bond index funds at a price of significantly less than 25 cents each year for every $100 you have invested?
No, the 2 largest fund companies in America can easily be on the internet: Vanguard and Fidelity. They both appeal to average investors, and will most likely continue to supply funds where you can invest money without paying sales charges (in addition to expenses) in 2011, 2012 and beyond. It is best to check out their low-cost index funds. Or could you rather speculate and pay 10 times the maximum amount of for yearly expenses elsewhere, hoping to get excellent active investment management – with no unpleasant surprises?
A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly together helping them to achieve their financial goals.