Do’s and Don’ts When Investing in Mutual Funds

November 27, 2009 by Tyrone
Filed under: Investments

In one of my previous posts, I mentioned about what to look for when buying mutual funds. Once you bought and invested your hard-earned money into mutual funds, then what’s the next step?

In my pursuit for further financial education, here are the do’s and don’ts of mutual fund investing:

WHAT TO DO WHEN INVESTING IN MUTUAL FUNDS:

- Pick funds that have a proven track record and a manager who has been around for more than five years.

- Pick funds that meet your investment objectives and risk tolerance.

- Select no-load funds, all other things being equal. If you’re interested in a load fund, make sure its performance is worth the fee. Here in the Philippines, UITFs are considered as no-load funds.

- Invest primarily in equity (stock) funds if you want growth. Although risky, equity funds provide the best returns as long as the stock market is performing well.

- If you’re comfortable bypassing a securities dealer, buy shares directly from the fund or bank to avoid paying sales charges. Discount brokers offer reduced sales charges. Mutual fund agents usually get the sales loads deducted as their commissions.

- Invest in four or five funds for diversification. As they say, don’t put all your eggs in one beasket.

- Unless you need the income, reinvest dividends.

- Keep all of your fund statements for your tax records.

WHAT NO TO DO WHEN INVESTING IN MUTUAL FUNDS:

- Don’t invest in a fund if you haven’t reviewed its prospectus and performance history.

- Don’t panic. The worst thing you can do is sell when the market’s dipping, and buy when it’s high.

- Don’t buy aggressive-growth funds if you’re averse to risk.

- Don’t switch back and forth between funds, trying to catch the next wave. By the same token, don’t rest on your oars and stick with a fund that isn’t performing or that changes its objectives. Seek the advice of a financial planner.

To get articles, you can subscribe using your favorite RSS feed reader or have them delivered directly to your email address.

Bookmark This Page:

What To Read Next

Search for more:

Tags: invest, mutual funds

Comments

8 Comments on Do’s and Don’ts When Investing in Mutual Funds

James Moralde on Fri, 27th Nov 2009 1:35 pm

I haven’t gone into the arena of mutual funds yet. But if my plans* push through favorably and thus eventually allow me to do full time blog work, then I’d have more extra time on my hands. Then perhaps I’d start educating myself about forex and mutual funds and all these things that people are raving about. I actually have a folder of saved pages about a variety of things…from brainwave entrainment to foreign exchange to C++, waiting to be pored over when I have the time. These page goes to one of those folders for future reference.

*(I’m hoping to quit my day job as soon as my monthly online income matches my monthly salary).

[Reply]

Jay Castillo on Fri, 27th Nov 2009 7:27 pm

Nice post Tyrone! I just realized it’s been almost 2 years since I started with balanced and equity mutual funds. I’m glad that they have finally recovered and already show some profit. However, I’m contemplating on unloading half of it for the experiment I mentioned to you about growing a small amount of money through the stock market. I’ll probably do it this coming 2010 when I will finally have the time to do so.

[Reply]

SoNn on Fri, 27th Nov 2009 8:50 pm

I wish investing in a mutual fund or UITF was as easy as online stock trading…

[Reply]

Financial Samurai on Fri, 27th Nov 2009 11:32 pm

Today could be the start of a big ARSE KICKING with the Dubai World news.

Tyrone, just replied to you on my site. Doing a contest and would like your prediction for TODAY’s market!

Cheers,

Sam-urai

[Reply]

dlysen on Sat, 28th Nov 2009 3:27 am

Mutual funds is like planting and harvesting on farmtown and farmville, don’t let it withered

[Reply]

Ms. Freeman on Sat, 28th Nov 2009 5:40 am

I am glad to see that one of my Mutual Funds is on it way back up. It took a nose dive for a moment.

[Reply]

Joliber Mapiles on Sat, 28th Nov 2009 6:26 pm

I’ve never been in Mutual Funds investments.. But this is something i’ll probably consider this coming 2010.

[Reply]

Gabe | freebloghelp.com on Tue, 1st Dec 2009 3:51 am

Good tips on mutual funds. As long as folks treat mutual fund risk the same as what they would do normally for stocks/bonds/cash, then they’re in great shape.