Anyone here invest in Mutual Funds?

[Ramon Becker]

Hello, I was wondering if anyone here invested in mutual funds and could explain to me how well they work. I have heard that they work well and that they are a good place to invest. However I would like to make sure I am set for retirement and was thinking of investing in a few mutual funds that could help well with that. If so just let me know how you use your mutual funds or what ones are popular to invest in.

 

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[jpmartin]

Hello, I was wondering if anyone here invested in mutual funds and could explain to me how well they work. I have heard that they work well and that they are a good place to invest. However I would like to make sure I am set for retirement and was thinking of investing in a few mutual funds that could help well with that. If so just let me know how you use your mutual funds or what ones are popular to invest in.

Short Answer: Stay Away.
Long Answer: Research SPIVA or learn the hard way...
Best Answer: Invest in Index Funds.

 

[lowtek]

Short Answer: Stay Away.
Long Answer: Research SPIVA or learn the hard way...
Best Answer: Invest in Index Funds.

What he said. Index funds are tied to the overall market movement. It's pretty rare for funds to beat the market, so an index fund, if you're going to invest in equities, is a reasonable bet.

What follows is my semi-educated opinion:

Over the time span of decades, index funds are an OK investment vehicle, as they are relatively low risk. However, given that the markets are heavily influenced by non market factors (read: government intervention) you are basically relinquishing control of your most vulnerable years (years when you aren't working to make money) to factors you can't control. It was recently revealed that the Great Depression was in fact caused by the Federal Reserve, tightening up credit when it needed to do the opposite. Are you willing to bet your future on a handful of other people who don't care about you?

Those that were depending on their index and mutual funds during the last downturn found that their money evaporated. By now, those investments have recovered and grown a little bit, but imagine the stress they felt having to cash out their 401k when their funds were at ~50% of what they were the few months before.

MY PERSONAL opinion is that cash flow yielding real estate is a better investment in the long term. I own a 4-plex and this will produce cash regardless of what happens in the stock market, bond market, or housing market.

 

[Ramon Becker]

What he said. Index funds are tied to the overall market movement. It's pretty rare for funds to beat the market, so an index fund, if you're going to invest in equities, is a reasonable bet.

What follows is my semi-educated opinion:

Over the time span of decades, index funds are an OK investment vehicle, as they are relatively low risk. However, given that the markets are heavily influenced by non market factors (read: government intervention) you are basically relinquishing control of your most vulnerable years (years when you aren't working to make money) to factors you can't control. It was recently revealed that the Great Depression was in fact caused by the Federal Reserve, tightening up credit when it needed to do the opposite. Are you willing to bet your future on a handful of other people who don't care about you?

Those that were depending on their index and mutual funds during the last downturn found that their money evaporated. By now, those investments have recovered and grown a little bit, but imagine the stress they felt having to cash out their 401k when their funds were at ~50% of what they were the few months before.

MY PERSONAL opinion is that cash flow yielding real estate is a better investment in the long term. I own a 4-plex and this will produce cash regardless of what happens in the stock market, bond market, or housing market.

This sounds reasonable since you always have incoming cash. Although what did you do to obtain the 4-plex. Did you take out a loan or what strategy did you use?

 

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[MJ DeMarco]

Short Answer: Stay Away.

Depends on the fees. I own some mutual funds, but they are very low cost, mostly Vanguard, some T.Rowe Price-- a bond mutual fund is an easier manage than trying to buy individual bonds themselves. In that case, I'm fine paying some small management fees. (VG is almost always < .5%)

 

[lowtek]

This sounds reasonable since you always have incoming cash. Although what did you do to obtain the 4-plex. Did you take out a loan or what strategy did you use?

Yes, my wife and I mortgaged the property. We put down 20% (which is required by law for investment properties). We chose a 4 plex because it spreads risk out over more units. As long as 2 units are occupied, the rental covers the mortgage itself and we lose a little bit on the utilities (we cover gas and water). Once 3-4 units are rented, then we are cash flow positive.

We've had it for a little over a year, and haven't had it go below 3 units occupied at any one time.

We use Craigslist ads to advertise vacancies. Pro tip: always call the prospect 30 minutes before the appointment to make sure they are serious. It sucks driving out to the property only to get stood up.

It's just my own personal personal preference. To each their own.

 

[Michael Burgess]

I've got a little money in an index fund based on the TSX (Toronto Stock Exchange). Index funds seem preferable over mutual funds to me because they have a lower cost of ownership (such as MER - management expense ratio, amongst other fees) and they track the whole market instead of a specific industry. That diversity seems smart to me unless you plan on becoming an economics master and betting on market trends.

Another interesting product similar to a mutual fund is a segregated fund, which actually comes with a guaranteed return of principal - while following the upside of the market. You can actually "lock in" the value of a seg fund when the stock market is up too, guaranteeing when you take your money out you get at least that amount. They're an insurance product that offer growth of the stock market with total safety, but they come with a catch of waiting 10+ years to get your principal and allocations out. Pretty interesting option if you have time to watch it grow.

That said, I don't think mutual funds (or index funds) are going to make you rich with a regular salary and throwing 15% of your income at it. They make more sense to build and preserve wealth once you already have it, not start from scratch. MJ DeMarco made sense in his book when he explained funds like that would take too long to accumulate value, and they're way more out of your control than your own business.

Probably best to focus on building a big income first, and thinking about investing your extra dough later.

P.S. when you choose to start investing, look into registered accounts - at least in Canada you can minimize what you pay in taxes by holding these products in registered accounts.

 

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[Get Right]

Nope, I gamble in vegas.

 

[Lasombra]

Nope, I gamble in vegas.

You are investing the fast way!
This, I have never been able to understand... I grew up learning that gambling with cards or dices is potentially illegal, addicting, etc...generally, it is a "bad" habbit. What is the difference between trading, investing, wagering, gambling, betting??? Aren't they all various ways to claim what other people have without arms?