Mutual Funds for a Beginner

mo42nyy · #1 10-30-2006, 07:33 PM

I have been trying to learn about mutual funds and have about 25 k to invest
Are there any good books I should read?
Would index funds be the best way for me to go now?
What is a resasonable goal for a beginner to try and achieve?

gull · #2 10-30-2006, 10:57 PM

There a number of books that you can read. I recommend reading the 12-step program on ifa.com.

Index funds are the best way to go.

I can't give much specific advice without knowing your situation, but I would suggest diversifying among asset classes using index funds. If you want to keep it simple, just go with Vanguard's Total Stock Market fund or one of their Target Retirement funds.

A reasonable goal is to have a low-cost consistent strategy (invest in index funds) and not vary from that.

fifield · #3 10-30-2006, 11:25 PM

[ QUOTE ]
I have been trying to learn about mutual funds and have about 25 k to invest
Are there any good books I should read?
Would index funds be the best way for me to go now?
What is a resasonable goal for a beginner to try and achieve?

[/ QUOTE ]

What's your risk tolerance?

50/50 in RSP and AGG if you want to sleep easy and protect against recession

magicformulainvesting.com and homework if you want a riskier, but much, much more entertaining, investment strategy

mo42nyy · #4 10-31-2006, 01:16 AM

Well 25 k is not a ton of money to me but not a small amount either. I would like to actually learn what the hell Im doing and really just need proper guidance so I know what direction to go in.
Like I said I dont mind doing research but I also want an investment that is time consuming and I have to worry about every day. i dont mind some risk but I want my money to work for me.

FiField
Can you elaberate on :50/50 in RSP and AGG?

Being that with a lot of these online bank accoutn you can get a 5% or better annual return what is a reasonable goal for a newbie investing in mutual fund?

fifield · #5 10-31-2006, 02:04 AM

[ QUOTE ]

FiField
Can you elaberate on :50/50 in RSP and AGG?

[/ QUOTE ]

RSP

AGG

RSP holds the 500 S&P Index stocks, but will beat the index when the index's smaller holdings are up more than the index's larger holdings because unlike the index, RSP holds equal weight of all 500 stocks. RSP is only 3.5 years old and should prove its worth as an ETF index beater over the long haul.

AGG is just a security blanket if you want to limit risk, as it performs best when the market is down, thus, should protect you against any recession.

50/50 was just an allocation suggestion cause it's easy. Also, most will tell you to redistribute your assests every year or so back to your original allocation.

gull · #6 10-31-2006, 04:21 AM

With index funds, you shouldn't need or want to check the value of your holdings daily. They are a long-term, buy and hold investment.

Academic research shows that nearly all of an investment's returns are due to variation asset class. You want to maximize your risk-adjusted returns by diversifying into many stocks and asset classes (through low-cost index funds). It's hard to give you an actual financial plan without more details. What is your risk tolerance?

A reasonable goal for investing in the stock market is a real (inflation-adjusted) return of about 5% (which is lower than the historical return of 8%. It's lower because some of the price increase is due to inflating p/e ratios and not an increase in value).

mo42nyy · #7 10-31-2006, 06:55 AM

thanks for the help so far
im deintly thinking long term with this but having it sit in a bank account seems like awaste

mo42nyy · #8 11-04-2006, 10:59 AM

Gull
Ive spent a lot of time the last few days reading the 12 step program in the IFA website. Is is very interesting and informative to say the least. However it also paints a very gloomy picture on actually trying to learn to invest andm pick different stocks. Is it really as impossible as they make it seem? Im deifntly going to start with index funds but they make it seem as though it isnt worth learning anything beyond that.

BigPoppa · #9 11-04-2006, 08:43 PM

[ QUOTE ]
There a number of books that you can read. I recommend reading the 12-step program on ifa.com.

Index funds are the best way to go.

I can't give much specific advice without knowing your situation, but I would suggest diversifying among asset classes using index funds. If you want to keep it simple, just go with Vanguard's Total Stock Market fund or one of their Target Retirement funds.

A reasonable goal is to have a low-cost consistent strategy (invest in index funds) and not vary from that.

[/ QUOTE ]

So are the expenses/fees of Vanguard in line with other funds?

I'm looking for an index fund I can have money go to every month from checking and not have to manage/sweat very month.

It's not money I'll need to touch for years.

Dazarath · #10 11-04-2006, 11:06 PM

Gull, since you seem to be a big advocate of index funds, could you make a simple suggestion for a portfolio? I have seen another poster's suggested portfolio, but I'm looking for something more like the following:

- Between 3-5 index funds, for simplicity.
- Ignore bonds, I want 100% equity.
- This money won't be touched for probably the next 20-30 years.
- I would like a very aggressive portfolio with the maximum return possible.