CAN invest money and get good investment management quite cheap. Some rich folks pay over 2% annually plus 20% of profits to invest money with the kind of hedge funds, with no performance guarantees. On another hand, average investors can invest and get good investment management at an annual cost of significantly less than 25 cents per $100 they invest while enjoying other advantages in 2011 and beyond.
Some of the rich and famous have paid handsomely for investment management and ended up broke. They are extreme cases where people aimc trusted someone blindly, which is never a good idea once you invest money. In the event that you purchase the proper places you’ve government regulation and visibility on your side. Plus, there must be no surprises on the performance front; with downright inexpensive and good investment management doing work for you. Welcome to the world of mutual funds, specifically no-load INDEX funds.
Here’s how never to invest for 2011 and beyond: give a money manager total freedom to invest your cash wherever he sees opportunity. No investment management outfit is good enough to win consistently speculating in the stocks vs. bonds vs. currencies, commodities or whatever game. You’re better off in the event that you invest profit many different 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 can pay 2% annually and still not get good investment management.
Most actively managed funds fail to beat their benchmarks (which are indexes), at the least partly as a result of expenses which can be taken from fund assets to fund things like 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 just track or duplicate the index. Let’s use stocks as an example, and claim that you intend to invest profit a diversified portfolio of the biggest best-known stocks in America, with no surprises.
Purchase an S&P 500 index fund, and you automatically own a really small little bit of 500 of America’s biggest and best companies. The S&P 500 Index is in the news headlines every business day, and the names of the 500 companies are public knowledge and can certainly be on the internet. This index can also be the benchmark that most stock fund managers try, and usually fail, to beat on a constant basis. Is this your idea of good investment management? I’d rather just invest profit the index fund for 2011 and beyond and know that I’ll don’t have any big surprises in good years or bad.
Don’t overlook the fee once you invest money. Index funds are not an issue in money market funds, where in fact the major fund companies have kept costs low just to compete for investor dollars. But also for equity (stock) and bond funds, where they make their profits, you are able to pay 10 times as much once you purchase actively managed funds vs. index funds, and still not get good consistent investment management. Do you need to appear far and wide to locate a place where you could purchase stock and bond index funds at a price of significantly less than 25 cents per year for every $100 you’ve invested?
No, the two largest fund companies in America can certainly be on the internet: Vanguard and Fidelity. They both appeal to average investors, and will more than likely continue to supply funds where you could invest money without paying sales charges (in addition to expenses) in 2011, 2012 and beyond. I suggest you check out their low-cost index funds. Or can you rather speculate and pay 10 times as much for yearly expenses elsewhere, hoping to have excellent active investment management – with no unpleasant surprises?
A retired financial planner, James Leitz comes with an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly using them helping them to attain their financial goals.