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, with no performance guarantees. On the other hand, average investors can invest and get good investment management at a yearly 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 finished up broke. They’re extreme cases when people aimc trusted someone blindly, that is never recommended whenever you invest money. In the event that you purchase the proper places you’ve government regulation and visibility on your 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 planet 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 adequate 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 money in a variety of mutual funds and diversify both within and throughout 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 could pay 2% a year and still not get good investment management.
Most actively managed funds neglect to beat their benchmarks (which are indexes), at least in part as a result of expenses which can be obtained from fund assets to cover such things as active management. Plus, fund performance may be full of 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 want to invest money in 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 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 quickly be 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 idea of good investment management? I’d rather just invest money in the index fund for 2011 and beyond and understand that I’ll have no big surprises in good years or bad.
Don’t overlook the price whenever 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 can pay 10 times the maximum amount of whenever you purchase actively managed funds vs. index funds, and still not get good consistent investment management. Do you really need to check far and wide to find a place where you are able to purchase stock and bond index funds at a price of significantly less than 25 cents each year for every $100 you’ve invested?
No, the two largest fund companies in America can quickly be on the internet: Vanguard and Fidelity. They both cater to average investors, and will most likely continue to offer funds where you are able to 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 would you rather speculate and pay 10 times the maximum amount of for yearly expenses elsewhere, hoping to obtain great 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 using them helping them to attain their financial goals.