CAN invest money and get good investment management quite cheap. Some rich folks pay over 2% a year plus 20% of profits to invest money with famous brands hedge funds, without any performance guarantees. On another hand, average investors can invest and get good investment management at an annually cost of less than 25 cents per $100 they invest while enjoying other advantages in 2011 and beyond.
A number of the rich and famous have paid handsomely for investment management and finished up broke. They are extreme cases when people aimc trusted someone blindly, that is never a good idea whenever you invest money. In the event that you spend money on the right places you have government regulation and visibility on your side. Plus, there should be no surprises on the performance front; with downright inexpensive and good investment management doing work for you. Welcome to the planet of mutual funds, specifically no-load INDEX funds.
Here’s how never 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 good enough to win consistently speculating in the stocks vs. bonds vs. currencies, commodities or whatever game. You’re better off if you invest profit many different mutual funds and diversify both within and over the asset classes: stocks, bonds, money market securities and specialty areas like gold and real estate. But be cautious here too, because in ACTVELY managed funds you can pay 2% a year and still not get good investment management.
Most actively managed funds fail to beat their benchmarks (which are indexes), at the least in part as a result of expenses which can be extracted from fund assets to fund such things as active management. Plus, fund performance could be saturated in 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 only 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 greatest best-known stocks in America, without any surprises.
Purchase an S&P 500 index fund, and you automatically own a tiny 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 quickly be located on the internet. This index can be the benchmark that a lot of stock fund managers try, and usually fail, to beat on a consistent basis. Is this your concept 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 no problem in money market funds, where in fact the major fund companies have kept costs low merely to compete for investor dollars. However for equity (stock) and bond funds, where they make their profits, you are able to pay 10 times just as much whenever you spend money on 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 could spend money on stock and bond index funds at a price of less than 25 cents each year for every single $100 you have invested?
No, both largest fund companies in America can quickly be located 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. It is best to have a look at their low-cost index funds. Or can you rather speculate and pay 10 times just as much for yearly expenses elsewhere, hoping to have really good active investment management – without any 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 achieve their financial goals.