CAN invest money and get good investment management quite cheap. Some rich folks pay over 2% per 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 an annually cost of significantly less than 25 cents per $100 they invest while enjoying other advantages in 2011 and beyond.
A few 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 advisable whenever you invest money. If you invest in the best places you’ve government regulation and visibility on your own side. Plus, there should be no surprises on the performance front; with downright inexpensive and good investment management employed by you. Welcome to the entire world of mutual funds, specifically no-load INDEX funds.
Here’s how not to invest for 2011 and beyond: offer a money manager total freedom to invest your money 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 profit a number of 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 may pay 2% per year and still not get good investment management.
Most actively managed funds neglect to beat their benchmarks (which are indexes), at least in part due to the expenses which can be extracted from fund assets to fund such things as active management. Plus, fund performance can be high 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 for instance, and claim that you want to invest profit a diversified portfolio of the biggest best-known stocks in America, with no surprises.
Invest in 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 every business day, and the names of the 500 companies are public knowledge and can quickly be found on the internet. This index can be the benchmark that most stock fund managers try, and usually fail, to beat on a steady basis. Is this your concept 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 whenever you invest money. Index funds are no problem in money market funds, where the major fund companies have kept costs low simply 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 invest in actively managed funds vs. index funds, and still not get good consistent investment management. Do you really need to appear far and wide to discover a place where you are able to invest in stock and bond index funds at a high price of significantly less than 25 cents annually for every $100 you’ve invested?
No, both largest fund companies in America can quickly be found on the internet: Vanguard and Fidelity. They both focus on average investors, and will more than likely continue to provide funds where you are able to invest money without paying sales charges (in addition to expenses) in 2011, 2012 and beyond. It is advisable 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 excellent active investment management – with no unpleasant surprises?
A retired financial planner, James Leitz posseses an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to achieve their financial goals.