Mutual Fund Investment Companies Worldwide

There are lots of Mutual Fund Investment Companies all over the world. With the growing popularity of the investment it has become important to analyze the best companies but there is no particular criteria to base the analysis. With the help provided by the professionals and the financial advisers it has become very easy to invest in mutual funds and it has become the secured way to generate money. There are various types of mutual funds and there are three main that are income funds, growth funds and balanced funds.

As mutual funds are becoming most preferred investment portfolio it is important that you know exactly where to buy these instruments so that your hard earned money is in safe hands. If you are trying to invest in mutual funds of insurance companies then it will not prove to be very profitable. They don't sell the product directly but try to combine with other products. Banks also provide with mutual funds but in the form of loaded funds. So if you want to generate more income, trust the stockbrokers and the investment advisers.

While selecting a group that offers investment advices you should be very cautious and beware of the fake groups. Try to research online about the group and read the reviews and feedbacks of the users so that you get the idea of the benefits and the drawbacks of the group easily. With so many mutual fund investment companies and various options available in the market it becomes difficult to choose the right one. You should know clearly your financial goals before investing and choose the mutual fund investment companies to invest your money. In this way you will get maximum returns for your money.

Russell Clark owns and operates the popular website Trust-Deed-Investor.com

Understanding Mutual Fund Terms

Once you know the meaning of these terms, it will be a lot easier for you to understand what all those mutual fund consultants and financial managers are saying.

Expense Ratio

One of the most common mutual fund terms is expense ratio. What does it mean? Expense ratio simply means the cost to operate your fund. This includes administrative fees, management fees and other expenses related to fund operations. You will see the expense ratio in a form of percentage deducted from your earnings.

If you do not understand why a certain percentage is deducted from your earnings, ask you financial consultant or fund manager to explain to you the whole thing. It may be difficult for your fund manager to come up with an itemized list of expenses and their corresponding amount but he or she can give you a good idea of what fees were paid out of your earnings.

12b-1 Fee

The term "12b-1 fee" may sound weird to you but this term is something that you should not forget when you invest in mutual funds. The 12b-1 fee pays for your promotion, distribution and marketing expenses. Actually, that weird sounding term was derived from the law which created this fee. What effect does 12b-1 fee on you investment? The 12b-1 fee can lower your overall return so watch out for this one.

Alpha

You probable learned from school that alpha is the first letter of the Greek alphabet. In the area of finance however, the mutual fund term alpha has nothing to do with the Greeks. The term alpha is a measure of the different in the fund's real return and its projected or expected return. For instance, a high alpha means that the fund is doing well and a low alpha is definite a cause for alarm. When you invest in, pay close attention to the alpha of your investment and make sure that it stays higher than 1.

Beta

Again, this term has nothing to do with the Greek alphabet. Beta represents the volatility of the funds. The beta is measured against the S7P 500 index. By nature, beta or the volatility of the funds can greatly affect the returns of your investment.

Richard Henderson runs his own internet marketing business from home. Check out these great Mutual Funds tips and articles or the more specific Mutual Funds Comparison articles and guides - http://www.mutualfundscomparison.com

Finding the Best Mutual Funds for You

It's obvious that any investor is going to want to be holding the best mutual funds. The problem is that most investors don't really have a clue as to what they expect from a mutual fund, and so don't have a plan to identify the best fund for their particular situation.

The will change from one investor to the next. We all have our particular situation to address. Factors like age, income, risk tolerance, years until retirement, and so on have a real impact on the expectations you have for your investments, and therefore the "best" fund for you.

For example, take a look at your risk tolerance. During the bear market years of 2000 through 2002 the Nasdaq 100 fell almost 80%, and the S&P 500 feel almost 50%. So to be fulling invested in only the equity markets would have exposed you to this kind of risk. If you were retired, or close to it, this kind of drop would be catastrophic. Conversely, if you were just out of school with 40 years until retirement and very little to invest right now, the prospect of that kind of drop would not seem as frightening, and might be tolerated in the hope that you could see the higher returns that equities have brought.

If you are looking for some kind of income stream out of these funds, because you are in retirement, then either fixed income funds or stock funds investing in high dividend yielding stocks could be a great choice. On the other hand, if you are currently in a higher tax bracket, more income may not be what you are looking for, but instead would be interested more in growth type investments that are likely to increase in value over time, but the results would be redeemed as a capital gains in later years.

We have information on some of the best ways to manage your mutual funds, including finding the best mutual funds.

Get more information regarding Fidelity mutual funds.

Investing in Mutual Funds

Investing money or assets comes from the Latin word vestis meant garment and the deed of things to put into pockets of some other people. Investing or investment is a term with several closely-related meanings in finance and economics, in association with saving the money. The deed is expected when an asset is usually purchased, or the equal money is deposited in a bank. The investment is made in hopes of getting returns or interest from it in the future. The advisors of mutual fund companies are required to execute the best through brokerage arrangements so that the commissions charged to the fund will not be a large amount for the investors. The process of buying and selling securities also has its own costs which are carried by the fund's shareholders along with these commisions.

Money from many investors is invested in stocks, bonds, short term investments and securities which is managed by good professionalists. This collective investment is called the mutual fund.The investors check at every point of gain or loss by the companies. The management fee, advisory fee along with administrative fees will be collected.

For the fund is usually synonymous with the contractual investment advisory fee charged for the management of a fund's investments.The fund manager trades with the securities and collects the dividens or the interest income. He then passes the message to the investors. The value of a share of the mutual fund, known as the net asset value per share.Everyday this is calculated based on the total value of the fund divided by the number of shares currently issued. The account contains the outstanding shares also. Many fund companies include administrative fees in the advisory fee component, when attempting to compare the total management expenses of different funds, it is helpful to define management fee as equal to the contractual advisory fee along with the contractual administrator fee. Contractual advisory fees may be structured as flat-rate fees which is the single fee charged to the fund, no matter what the asset value is.

Brokerage commissions are directly proportional to the rate of turnover per year i.e, higher the rate of the portfolio turnover, the higher the brokerage commissions. These commissions are additional to the investors and are in the operations terms. These are incorporated after three months into the price of the funds. Portfolio turnover refers to the number of times the fund's assets are bought and sold over the course of a year. Different kinds of securities are invested in mutual funds. Some are bonds, stock, cash etc.

1. Bond funds can vary according to risk ie, high-yield investment or corporate bonds issued by government agencies, corporations or municipalities and also short or long term bonds. Mutual funds which are of tax-free municipal bond income are also tax-free to the shareholder.

2. Stock funds can be invested primarily in the shares of a particular industry in a particular department known as sector funds. They may in research and development or administration etc. Mutual funds carrying taxable distributions can be either capital gain depending on how the fund earned those distributions.

Jon Elton owns and operates a Best Penny Stocks Picks website to help other investors with their stock decisions. He also operates a Home Based Business earn money online site to help entrepreneurs gain experience and wealth.

Investment Opportunities in IPOs

IPO stands for Initial Public Offer and investment in IPO is not a new phenomenon. While it provides wonderful opportunities to investors to mint money, it can also become dangerous if individuals do not exercise caution in their choice of IPOs that they invest.

As per the conventional wisdom, the investors need to purchase stocks with the intention of holding them for a long term. The money can be made only when, the individuals keep their investment for a year or so. Although this is true and investors need to stick to it, most IPOs come with a discount tag to their actual value and can present profits to the investor thereon. This profit is what, termed as listing gain.

Tips for IPO investments:

Below mentioned are a couple of tips that can hold an individual in good stead while investing in IPOs. By investing in IPOs, investors block a huge chunk of their cash for about a month or so. Moreover, invariably, the number of shares allotted to individuals is not even half of whatever they apply. This is a critical thing, as it can happen that the shares may get oversubscribed at least 6 to 7 times and investors may invest only a small amount. The ultimate result would be they might end up not getting a single share. In these circumstances, not only do they lose the interest for that time being, but also lose opportunities of investing in other IPOs that were open during that time.

In order to avoid such situations, it is better for investors to try investing only during last couple of days of an IPO. In addition, they need to keep an eye on the number of times the issue got oversubscribed. Investors can easily monitor this by going online. With a hit and trial method, they can get a fair idea about the amount of shares that they would get, based on the money invested and the number of times the issue gets oversubscribed.

Important Parameters of Consideration:

Although most IPOs result in gains for the investor, there has to be some watchfulness regarding the IPOs to invest. Generally, it is a good idea to invest in the IPOs of those companies that have yielded good returns to their investors. It is also better to have a look at, the previous record of accomplishment of such companies and the number of years of their existence. This would at least give an idea to the investor that, the promoters have a good understanding of the business. In addition, they are not fly by night operators.

The other important factor is to have a look at the P/E multiple. It stands for the Price/Earning Multiple. Here, the "pricing" is as per the present market price of the share, and "earning" is the earning per share of the company. P/E multiples of stock indicate the number of times the market is willing to pay for the current earnings of the firm. For instance, a stock has an EPS of $ 10 and the market price of the share is $ 100, this means that P/E multiple is 10 or the investors are willing to pay 10 times the company's earnings.

On most occasions, promoters launch their IPOs at boom times and extract the maximum of out them as the IPOs in all probabilities get oversubscribed many a times. Nevertheless, this does not go well for the investors, as they are stuck with their shares at a higher price with lesser chance of appreciation.

John Elton owns and operates a Best Penny Stocks Picks website to help other investors with their stock decisions. He also operates a Home Based Business earn money online site to help entrepreneurs gain experience and wealth."

What Kinds of Mutual Funds Are Available?

When you start investing in mutual funds, you will need to choose from a large selection. Mutual funds are available in many different kinds and in different levels of risk. Since they are based on stocks, among other things, there will also be a reflection on the market of how well certain stocks are performing. Here are some types of mutual funds that are available for you to buy.

Mutual Funds Reflect the Market

If you are aware that certain types of stock are not performing well at the time you are looking to buy, then you can skip over those mutual funds that deal with low performing stock. Remember that a mutual fund is composed of various stocks, bonds, and other things, and will reflect that market.

Different mutual funds, however, cover the markets differently, giving you either a broader base of protection or a narrow one if it concentrates on a specific market sector. You can buy mutual funds by market sector, and in some cases, by geographic location - such as a particular country.

Load and No-Load Funds

Mutual funds are generally available as either a load fund or a no-load fund. All that means is that either there is a sales fee associated with it or there is not one with it. The value of the mutual fund is not necessarily determined by these criteria, however, so you can find good funds under either term.

Types of Funds

Several different types of mutual funds are available for you to focus your investments. These include four kinds:

• Bond Funds

Bond funds are made up of government, municipal or corporate bonds and serve as a loan to one of these agencies. As the loan is slowly repaid, you gain interest. This will generally provide you with a stable but lower rate of interest.

• Money Market Funds

These are low interest loans that are made either to state or local governments. They are very stable but on the low end in interest when it comes to mutual funds. They are generally short-term and can last anywhere from one day up to about a year. An advantage is that they are generally tax-free if it is for the state you live in, and free from Federal tax.

• Stock Funds

This type of fund will potentially give you the highest interest rate of mutual funds. They are the most commonly sold funds, and can bring a lot of growth to your portfolio. Be careful of investing in one sector only, as this can lead to costly losses if that sector fails.

• Mixed Assets

As its name implies, it is a mixed bag of stocks and bonds to provide you with a more stable portfolio through wider diversification. The bonds offset the rising and losses of the stocks and should provide you with a mix that is good for the long haul.

You can choose from a variety of types of funds to make up your perfect mix. Some of these can also match your risk level by giving you a conservative, moderate or a high level of risk.

When you look to purchase mutual funds, be sure to compare companies, costs, and all other features before you buy. Look at the age of the company your fund is from, the type of stock, your level of participation, and how much assistance the fund provides. Companies vary, and the degree of protection you have may vary, too.

For more information on how to invest in shares, visit http://www.investinshares.freedvd.com.au

James McInnes is a professional share market trader and investment entrepreneur, with many years experience trading the Australian Share market. You can visit his site at http://www.investinshares.freedvd.com.au for further information on trading the Australian Share Market

How to Select A Mutual Fund

Investing in mutual funds is a way to make a surer investment than some other forms. It provides you with a more stable foundation for your investments and can act as a balance to other high-risk type of instruments. Here are some tips on how you can choose a good mutual fund that will bring you the safe returns you want.

Determine Your Investing Goals First

Your investing goals will help you determine just how you should invest. Mutual funds come in different forms, as well as risk levels, so you will need to make a decision about this from the start.

Decide How Much You Have for Fees

Some forms of mutual funds, such as no load funds, have no additional fees associated with them. This also means, though, that you do not get the same level of services with your mutual fund as you would with those that have fees. You have no professional assistance or oversight of your fund, which means that it will not be given the best attention or care. Of course, if you know what you are doing, then this would give you a low cost way to control your own funds.

Loaded funds mean that you will have to pay a sales fee for your purchase. Along with the fees, though, comes a lot better management of your investment. Your broker will pay closer attention to how your investments are doing which also means that you have a lower risk involved.

Choose How Much Involvement You Want

With no load funds, you need to pay attention to your own investments. This is because you are the only one making those choices, and any success you have is largely up to you. You also will not receive investment counsel from your choice of mutual fund company.

Loaded funds are the best way to go if you want professional care over your investment. This allows you to take a hands off approach and they do the investing for you. They know that poor management will mean loss of customers and money so they have a very good reason to want to do a good job.

Make Decisions over the Variables

Once you decide about the cost needed for the investment, there are some other factors you want to choose from. This would include things like:

• The time frame

• The taxes

• The fund's goals.

You will also need to consider how profit comes to you. If you are looking for dividends to be paid, then you need to look for funds that will do that.

Others may give capital appreciation or capital gains distribution. Just be sure that you know beforehand, so that you know how money is either to be paid to you or reinvested.

All mutual fund companies are not the same, so you will need to look over the details of each before you decide. If you want a particular fund, then you will have to choose from those companies that deal with it. For more information on investing in shares visit http://www.investinginshares.freedvd.com.au/

James McInnes is a professional share market trader and investment entrepreneur, with many years experience trading the Australian Share market. You can visit his site at http://www.investinginshares.freedvd.com.au for further information on trading the Australian Share Market

Basics Tips on Mutual Fund Investing

Whether your are a savvy investor in the stock market or not, you've probably heard the term "Mutual Fund." If you are like me a few years back knowing nothing about the ABC of stock investing, you probably might lost some of your hard-earned money in the money market.

But do you know how this 'mutual fund market' does work? The performance of mutual fund depends mainly on the efficiency of fund manager who manages portfolio of stocks on behalf of investors. So making an informed decision, choosing a rated and well-performed fund manager is absolutely critical to your success financially in the mutual fund market. That's why you may need Basics Tips on Mutual Fund Investing.

So back to basics, mutual funds are a collection of stocks and bonds that are owned by a group of people rather than one individual investor. This makes it a more advantageous. First of all, it allows investors to buy in with considerably less money than it would take to purchase the same 'portfolio' on their own and it spreads the risks out there among a group of people should something go wrong.

In addition, because it isn't one single stock or bond or generally even one sector of the stock market, the risks of vanishing your money are reduced to a greater extent. But always keep in mind that the market does perform worst and there could be deep cut occasionally in share prices. Its true that there really is no method or strategy invented in investment market that is completely safe and without risks.

Mutual funds, however have lower risks than many other investment options, that makes them an attractive buy for those who lacks proper up-to date knowledge and skills in investment market. In fact, mutual funds often have much better rates of return than the average savings account at your local bank and the risks are minimal in this type of investment, particularly compared to other more riskier ventures.

Additionally, if you have an idea of which sectors are performing well and strengthening the GDP growth, you are at an advantageous position of choosing a good and slightly riskier sectoral fund. But make sure, always select a star rated company. Diversification is one of the key ingredients of a healthy portfolio and mutual funds will help you get diversified portfolio in broader sense.

If you are young and just beginning your career and in no real hurry for retirement, this is the one of the safest ways to invest your money for the long term. But most mutual funds do not have the high payoffs that many investors seek to include for their retirement planning.

There are essentially three types of mutual funds with some variations on each. First there are money market funds. These funds are great for the long-term investor who has a slow and steady approach to investing that are better than leaving your money in a interest-paying savings account. Second are the equity funds that provide slow growth over time with some income along the way. And finally there are the fixed income funds that are created to provide a current income over time. This is great for those who have retired or investors that are extremely conservative in nature.

Kaushik Adhikary operates http://www.myinsuranceinsiderinfo.com a blog all about fresh and quality content on insurance and personal finance field. He loves giving away Free Stuffs and Free 5 Days Interactive Email Course alongwith Free Membership and Newsletters.

For more info,Visit- http://myinsuranceinsiderinfo.com/2008/02/07/basics-tips-on-mutual-fund-investing/

Exchange Traded Funds (ETFs)

Exchange Traded Funds (ETFs) are mutual funds that trade like stocks. Each ETF has its own ticker symbol and expense ratio (assets that are used pay for operating expenses). They are very easy to trade and understand.

ETFs have transformed from a way to investment in the major indexes into a wide range of other financial markets and sectors. Today, ETFs give you a variety of different markets and commodities to trade without the hassle of opening up separate brokerage accounts. Because ETFs are traded like stock, they can be purchased through almost all of your brokerage accounts. ETF's can even be traded in most 401K, IRAs, and other retirement accounts.

For example, let's say you wanted to invest in Crude Oil (light, sweet crude oil). Crude Oil is traded on NYMEX. If you did not have access to NYMEX through your current account, you would have to open up a separate brokerage account to get access to this commodity.

Now, with ETFs, all you would have to do is invest in ticket symbol: CUSIP. "This ETF will track the price of West Texas Intermediate (WTI) light, sweet crude oil delivered to Cushing, Oklahoma, whose price is the primary benchmark in the U.S. for crude oil."

It is a much easier transaction to buy the ETF because it trades like a stock. Like stocks, though, ETFs trade throughout the day and are priced by the market, not necessarily at their net asset value (unlike mutual funds that only trade at their settled net asset value at the end of the trading day). To your broker, trading an ETF is the same as trading a stock. The fee you pay to buy or sell an ETF is the same fee you would pay to trade a stock.

You also don't have to worry about calculating how many, "contracts" to buy or contract expiration dates as you would with a separate futures account. The EFT takes care of all of this for you.

Although ETFs trade differently than your traditional mutual funds, your decision to buy, hold or sell remains the same.

The decision to use ETFs is up to you. They are ideal for day trading, swing trading and long term, "buy and hold" investments. Because ETFs trade like stocks, they minimize trading restrictions often imposed by your mutual funds. For example, on some Fidelity Mutual Funds, you would face a short term holding fee of $75.00 if you traded your mutual fund without holding it for approximately 90 days (Check with your fund company to confirm their policy.). If you were attempting to day trade or swing trade this mutual fund, you would have to pay $75 dollars every time you violated this holding period. If you were to purchase an ETF instead, you would only have to pay your brokerage fees for a stock transaction.

ETFs have grown in popularity and have been accepted by the professional and novice investor as a valid investment choice. They have allowed many people to invest in markets that were not easily available. The only choice for you now is to research the wide range of ETF's available to you and see which ones fit into your overall investment portfolio.

Michael MeAngelo writes a BLOG on Online Trading at http://www.onlinetradingday.com

What is a Mutual Fund?

Ever wondered what is a mutual fund? A mutual fund is a pool of money run by a professional or group of professionals called the "investment adviser." It is a company that pools money from many investors and invests the money in stocks, bonds, short-term money-market instruments, other securities or assets, or some combination of these investments.

The combined holdings the fund owns are known as its portfolio. Each share represents an investor's proportionate ownership of the fund's holdings and the income those holdings generate.

Because it is sometimes hard for investors to become experts on various businesses for example, what are the best steel, automobile, or telephone companies, investors often depend on professionals who are trained to investigate companies and recommend companies that are likely to succeed.

In a managed mutual fund, after investigating the prospects of many companies, the fund's investment adviser will pick the stocks or bonds of companies and put them into a fund. Investors can buy shares of the fund, and their shares rise or fall in value as the values of the stocks and bonds in the fund rise and fall.

Fees

Investors may typically pay a fee when they buy or sell their shares in the fund, and those fees in part pay the salaries and expenses of the professionals who manage the fund.

Even small fees can and do add up and eat into a significant chunk of the returns a mutual fund is likely to produce, so you need to look carefully at how much a fund costs and think about how much it will cost you over the amount of time you plan to own its shares.

If two funds are similar in every way except that one charges a higher fee than the other, you'll make more money by choosing the fund with the lower annual costs.

Past performance is not a reliable indicator of future performance. So don't be dazzled by last year's high returns. But past performance can help you assess a fund's volatility over time.

Making any sort of investment involved a certain amount of risk so it is always wise to seek the advice of a professional before making any decisions.

Bill Stone writes for Direct Online Loans who help homeowners find the best available loans via the http://www.directonlineloans.co.uk website.

About Mutual Funds

Outlined below are some of the advantages and disadvantages of mutual funds. Every investment has advantages and disadvantages. But it's important to remember that features that matter to one investor may not be important to you. Whether any particular feature is an advantage for you will depend on your unique circumstances.

Advantages

For some investors, mutual funds provide an attractive investment choice because they generally offer the following features:

Professional Management:

Professional money managers research, select, and monitor the performance of the securities the fund purchases.

Diversification:

Diversification is an investing strategy that can be neatly summed up as "Don't put all your eggs in one basket." Spreading your investments across a wide range of companies and industry sectors can help lower your risk if a company or sector fails. Some investors find it easier to achieve diversification through ownership of mutual funds rather than through ownership of individual stocks or bonds.

Affordability:

Some mutual funds accommodate investors who don't have a lot of money to invest by setting relatively low pound amounts for initial purchases, subsequent monthly purchases, or both.

Liquidity:

Mutual fund investors can readily redeem their shares plus any fees and charges assessed on redemption at any time.

Disadvantages

But mutual funds also have features that some investors might view as disadvantages, such as:

Costs despite Negative Returns:

Investors must pay sales charges, annual fees, and other expenses regardless of how the fund performs. And, depending on the timing of their investment, investors may also have to pay taxes on any capital gains distribution they receive - even if the fund went on to perform poorly after they bought shares.

Lack of Control:

Investors typically cannot ascertain the exact make-up of a fund's portfolio at any given time, nor can they directly influence which securities the fund manager buys and sells or the timing of those trades.

Price Uncertainty:

With an individual stock, you can obtain real-time (or close to real-time) pricing information with relative ease by checking financial websites or by calling your broker. You can also monitor how a stock's price changes from hour to hour - or even second to second. By contrast, with a mutual fund, the price at which you purchase or redeem shares will typically depend on the fund's net asset value, which the fund might not calculate until many hours after you've placed your order.

Making any sort of investment involved a certain amount of risk so it is always wise to seek the advice of a professional before making any decisions.

Jerry Warner writes general finance and loan articles for the Bad Credit Loans Online website at http://www.badcreditloansonline.co.uk

Different Types of Mutual Funds

This is a guide to the different types of mutual funds. When it comes to investing in mutual funds, investors have literally thousands of choices. Before you invest in any given fund, decide whether the investment strategy and risks of the fund are a good fit for you. The first step to successful investing is figuring out your financial goals and risk tolerance - either on your own or with the help of a financial professional. Once you know what you're saving for, when you'll need the money, and how much risk you can tolerate, you can more easily narrow your choices.

Most mutual funds fall into one of three main categories - money market funds, bond funds (also called "fixed income" funds), and stock funds (also called "equity" funds). Each type has different features and different risks and rewards. Generally, the higher the potential return, the higher the risk of loss.

Money Market Funds:

Money market funds have relatively low risks, compared to other mutual funds. Investor losses have been rare, but they are possible. Money market funds pay dividends that generally reflect short-term interest rates, and historically the returns for money market funds have been lower than for either bond or stock funds.

Bond Funds:

Bond funds generally have higher risks than money market funds, largely because they typically pursue strategies aimed at producing higher yields. Because there are many different types of bonds, bond funds can vary dramatically in their risks and rewards.

Stock Funds:

Although a stock fund's value can rise and fall quickly (and dramatically) over the short term, historically stocks have performed better over the long term than other types of investments - including corporate bonds and government bonds.

You can purchase shares in some mutual funds by contacting the fund directly. Other mutual fund shares are sold mainly through brokers, banks, financial planners, or insurance agents. All mutual funds will redeem (buy back) your shares on any business day.

Making any sort of investment involved a certain amount of risk so it is always wise to seek the advice of a professional before making any decisions.

Bill Stone writes for Direct Online Loans who help homeowners find the best available loans via the http://www.directonlineloans.co.uk website.

8 Reasons Why Mutual Funds Make For Lousy Investments

Many people think that investing in mutual funds is the way to go and the best method for getting rich. I think mutual funds are horrible investments. Here are 8 reasons why you should not invest in mutual funds.

1. Mutual funds don't beat the market.

72% of actively-managed large-cap mutual funds failed to beat the stock market over the past five years. Trying to beat the market is difficult, and you're better off putting your money in an index fund. An index fund attempts to mirror a particular index (such as the S&P 500 index). It mirrors that index as closely as it can by buying each of that index's stocks in amounts equal to the proportions within the index itself. For example, a fund that tracks the S&P 500 index buys each of the 500 stocks in that index in amounts proportional to the S&P 500 index. Thus, because an index fund matches the stock market (instead of trying to exceed it), it performs better than the average mutual fund that attempts (and often fails) to beat the market.

2. Mutual funds have high expenses.

The stocks in a particular index are not a mystery. They are a known quantity. A company that runs an index fund does not need to pay analysts to pick the stocks to be held in the fund. This process results in a lower expense ratio for index funds. Thus, if a mutual fund and an index fund both post a 10% return for the next year, once you deduct The expense ratio for the average large cap actively-managed mutual fund is 1.3% to 1.4% (and can be as high as 2.5%). By contrast, the expense ratio of an index fund can be as low as 0.15% for large company indexes. Index funds have smaller expenses than mutual funds because it costs less to run an index fund. expenses (1.3% for the mutual fund and 0.15% for the index fund), you are left with an after-expense return of 8.7% for the mutual fund and 9.85% for the index fund. Over a period of time (5 years, 10 years), that difference translates into thousands of dollars in savings for the investor.

3. Mutual funds have high turnover.

Turnover is a fund's selling and buying of stocks. When you sell stocks, you have to pay a tax on capital gains. This constant buying and selling produces a tax bill that someone has to pay. Mutual funds don't write off this cost. Instead, they pass it off to you, the investor. There is no escaping Uncle Sam. Contrast this problem with index funds, which have lower turnover. Because the stocks in a particular index are known, they are easy to identify. An index fund does not need to buy and sell different stocks constantly; rather, it holds its stocks for a longer period of time, which results in lower turnover costs.

4. The longer you invest, the richer they get.

According to a popular study by John Bogle (of The Vanguard Group), over a 15- or 16-year period, an investor gets to keep only 47% of a cumulative return from an average actively-managed mutual fund, but he or she gets to keep 87% of the returns in an index fund. This is due to the higher fees associated with a mutual fund. So, if you invest $10,000 in an index fund, that money would grow to $90,000 over that period of time. In an average mutual fund, however, that figure would only be $49,000. That is a 40% disadvantage by investing in a mutual fund. In dollars, that's $41,000 you lose by putting your money in a mutual fund. Why do you think these financial institutions tell you to invest for the "long term"? It means more money in their pocket, not yours.

5. Mutual funds put all the risk on the investor.

If a mutual fund makes money, both you and the mutual fund company make money. But if a mutual fund loses money, you lose money and the mutual fund company still makes money. What?? That's not fair!! Remember: the mutual fund company takes a bite out of your returns with that 1.3% expense ratio. But it takes that bite whether you make money or lose money. Think about that. The mutual fund company puts up 0% of the money to invest and assumes 0% of the risk. You put up 100% of the money and assume 100% of the risk. The mutual fund company makes a guaranteed return (from the fees it charges). You, the investor, not only are not guaranteed a return, but you can lose a lot of money. And you have to pay the mutual fund company for those losses. (Remember also that, even if you do make a return, over time the mutual fund company takes about half of that money from you.)

6. Mutual Funds are unpredictable.

The holdings of a mutual fund do not track the stock market exactly. If the market goes up, you might make a lot of money, or you might not. If the market goes down (the way it is now), you might lose a little bit of money . . . or you might lose A LOT. Because a mutual fund's benchmark isn't a particular market index, its performance can be rather unpredictable. Index funds, on the other hand, are more predictable because they TRACK the market. Thus, if the market goes up or down, you know where your money is going and how much you might make or lose. This transparency gives you more peace of mind instead of holding your breath with a mutual fund.

7. Mutual Funds are sales items.

Why don't all these money and financial magazines tell you about index funds? Why don't the covers of these magazines read "Index Funds: The Most Obvious And Rational Investment!" It's simple. That's a boring heading. Who would want to buy something that isn't exciting or that doesn't tickle one's imagination of immense riches? A magazine with that headline won't sell as many copies as a magazine that boasts "Our 100 Best Mutual Funds For 2008!" Remember: a magazine company is in the business of selling... magazines. It can't put a boring headline about index funds on its front cover, even if that headline is true. They need to put something on the cover that will attract buyers. Not surprisingly, a list of mutual funds that analysts predict will skyrocket will sell loads of magazines.

8. Warren Buffett does not recommend mutual funds.

If the above seven reasons for not investing in mutual funds don't convince you, then why not listen to the wisdom of the richest investor in the world? In several annual letters to the shareholders of Berkshire Hathaway, Warren Buffett has commented on the value of index funds. Here are a few quotes from those letters:

1997 Letter: "Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results (after fees and expenses) delivered by the great majority of investment professionals."

2004 Letter: "American business has delivered terrific results. It should therefore have been easy for investors to earn juicy returns: All they had to do was piggyback corporate America in a diversified, low-expense way. An index fund that they never touched would have done the job. Instead many investors have had experiences ranging from mediocre to disastrous."

Bottom Line: If you want to make money, you need to copy what rich people do. So if Buffett doesn't like mutual funds, why would you? So, if not mutual funds, what should passive investors invest in? The answer by now is clear. Invest in index funds. Index funds have lower fees, and you keep more of your returns in the long term. They are also more predictable, and they give you peace of mind.

The author of this article is Jim "The Net Fool".

He is owner of theNetFool.com If you'd like to learn more about the stock market or internet marketing, you can visit http://www.thenetfool.com You'll find all the information you need!

Why Save And Invest?

It really baffles me when people who work so hard for money don't want their money to work harder. Managing money is one of the most important and most difficult things in life. We all work for money. We toil day and night, sacrifice our leisure, and leave our near and dear ones and go abroad to brighten our prospects. Then why don't we make our money work for us. Remember, saving and investing is not about putting your money in a haphazard manner and investing somewhere just because one our friend or relative has told us to do so.

By saving and investing I mean putting your hard earned money to good use so that you can earn maximum profit from your investments. There are many people who believe in earning and spending today. Little do they realize that they are partying all the way to disaster? A day will come when we'll have to quit the job and relax. But would we really be able to relax? Who will look after our expenses? After our retirement income will cease whereas expenses will be as they were before. We work hard throughout our life so that we could live a comfortable life and provide the same to our children. A major chunk of our income goes towards children education, marriage and providing them with money till they are on their own. Children are dependent on their parents till they grow up and the situation will be just the opposite when we retire.

Do we really want the situation to reverse? Will we be comfortable asking for money from our children? Well, there is no harm but still the answer is a big NO. Also if we consider the growing inflation our expense will grow by leaps and bounds by the time we retire. It's better to sacrifice some leisure now rather than compromise later on when we are on the brink of retirement. When we are young we can face hardships better but as we grow old we tend to become weak in all aspects be it physical mental or psychological. So at least in one aspect we should be very strong and that is financial and that we can achieve only if we save and invest regularly.

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