Investing for beginners

   / Investing for beginners #21  
How do most mutual funds react to a downturn or impending downturn in the stock market? Do they tend to sell in a downturn or hang tight knowing that the market always comes back eventually?
 
   / Investing for beginners #22  
How do most mutual funds react to a downturn or impending downturn in the stock market? Do they tend to sell in a downturn or hang tight knowing that the market always comes back eventually?

If you research the more popular and successful fund sites you will find access to each individual fund and the positions held including the cash position...compile the data and you will see how they work...they also issue quarterly and annual reports etc...

Personally if I was looking at mutual funds I would focus on those that pay dividends...
 
   / Investing for beginners #23  
Run over to Seeking Alpha, register (it's free) and start reading. After a few months, you will learn a lot about investing. However, don't assume everything you read is correct because it's not. But it's a good and free place to learn stuff.

Regarding mutual funds reactions to market volatility, most mutual funds are at the mercy of the investors, if investors pull out, the fund manager must liquidate holdings to meet the cash demands. Active funds (manager trying to beat the market) will move funds around as they to position the fund to meet their goals but ultimately may have to liquidate positions they don't want to in order to meet cash demands. Passive funds will just invest all their funds into positions that match their benchmark. They will generally only sell to meet investors who are cashing out or. Closed end funds don't have to sell anything to meet the demands of investors cashing out and don't have to change their strategies when there are heavy sell offs.

TD Ameritrade, ETrade, and Schwab are all discount brokers and offer a lot of services for free. Just remember advisors generally don't get paid unless they sell you something and some of their products offer high commissions that may not be the most appropriate product for you. At your age, you probably won't be retiring for about 20 years so a simple and very likely winning strategy would be to put as much money into tax deferred savings plans as you can, then top off using a taxable account and just invest in a S&P500 index fund. Always remember that 80% of active fund managers don't beat their benchmark (in other words, 80% are D or F students), so why not be the benchmark and just be a C student? If you want to do better than a C, go back to my first sentence.
 
   / Investing for beginners #24  
There is an important distinction between actively managed mutual funds and index mutual funds that you need to understand. I'm a fan of the index funds. They have very low overhead and they will follow the specific market segment they index, independent of what other investors do. I'm well into retirement and not adding to investments at this time, but if I was I would be steadily investing in S&P 500 or Total Market indexes, taking advantage of the current market correction and expecting a major recovery in a few months or few years. All my investments are with Fidelity and Vanguard. They are very transparent and have excellent on line information access.
 
   / Investing for beginners #25  
Independent financial advisors, any size, any place, are expensive. Most, not all, have their fees deducted directly from your capital, so it is difficult to determine your cost for their advice. Advisors are paid with your money, from your accounts, in up markets and down markets.

I have a T. Rowe Price annual report before me. For the X X X X X FUND, annual direct investment expense ratio is 0.64% per year.

X X X X X FUND - ADVISOR CLASS annual investment expense ratio with an intermediary independent financial advisor is 0.91% per year.

Assuming the long term growth rate for stocks will be 4% over inflation, a nearly 1% annual fee is a killer. Deal direct.


During my final fourteen working years my employer paid 100% of the 401(k) fund expenses, in addition to making a 3% match on 6% contributions, so on the funds within the 401(k) the employee expense ratio was not 0.91% not 0.64% but 0.00%. Not all employers are so generous.

As a general rule, I think it's safe to say that professional assistance will cost money - directly or indirectly. If you place a top priority on minimizing those fees, I can respect that approach.

Personally, I needed advice. I started working with my financial advisor in my early 30s. My biggest issue was that my risk tolerance was ridiculously low for my age. If I had not substantially changed my investment strategy, I wouldn't be retired today.

I also found focusing on long-term investment planning to be oddly depressing. The best case scenario was that I might have enough money to retire when I'm old, and I didn't look forward to being old. The non-best case scenario was that things wouldn't work out, and I'd lose my money or something.

So I think it comes down to a personal call as to whether you are comfortable doing it alone vs. paying someone for advice.
 
   / Investing for beginners #26  
I think a good way to get started is to find a local financial advisor. Personally, it would drive me insane to attempt to make investment decisions on my own. There are about a billion different options with different strategies, goals, and risks.

A good advisor would start by assessing your current state, goals, risk tolerance, etc..


Be cautious when looking for your "financial advisor" ... a great many of them are unqualified at best.
 
   / Investing for beginners #27  
Can anyone recommend the best way to start investing for beginners? For example, opening an account with TD Ameritrade or Fidelity? Broad topic I know, just would like someplace to start. Thanks!

Buy this little book (Sticky Stock Charts) and spend one-half hour reading it, and a whole, brave new world will open up for you. Learning basic candlesticks is fundamental to being able to understand technicals.

https://amzn.to/2TezO7R
 
   / Investing for beginners #28  
Be cautious when looking for your "financial advisor" ... a great many of them are unqualified at best.

Agreed. Most sell products and have no idea how to position, swing, or day trade, not to mention basic options strategies.
 
   / Investing for beginners #29  
How do most mutual funds react to a downturn or impending downturn in the stock market? Do they tend to sell in a downturn or hang tight knowing that the market always comes back eventually?

In a bear market they sell off because the underlying assets are decreasing in value.
 
   / Investing for beginners #30  
I haven’t seen anyone recommend index funds as an alternative to mutual funds. Index funds are generally less loaded than mutual funds as they require less management. One tax related problem with investing in securities with your retirement plan is that you lose the tax advantaged cap gain treatment when securities are sold and the cash distributed to you.
 

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