In most cases, you don’t need to invest in mutual funds. So, why do more than 90 million people in the US invest in mutual funds? Marketing. These funds spend big dollars marketing to the public and financial planners all over the country. This creates a huge conflict of interest, so you have to stay on top of where you invest your money. The most important thing to understand about investing in mutual funds; they are not all created equal. Each has a different Fund Manager, objectives, investment strategies, and most importantly…costs.
With so many low-cost ETFs to choose from these days, it makes me wonder why anyone would want to invest in mutual funds at all anymore… Why take the risk that your Fund Manager will have a good year when the S&P 500 index consistently outperforms the majority Money Managers?
IVV is an example of an ETF that tracks the S&P 500. You can buy it just like a stock, but its more like a mutual fund. The big difference between IVV and a mutual fund? The costs! IVV has an expense ratio of 0.09%. Compare that with Goldman Sachs new fund, GMAMX, with an expense ratio of 3.30%! Not only do they want you to take on more risk, but more costs as well. No thanks! *A mutual fund is usually considered “low-cost” if the expense ratio is less than 1.00%.
Of course, picking the right funds, ETFs or stocks isn’t how you make money in the market over time. Having a PLAN is the key to great, long-term market returns. In Step 2 of The Life Plan, you create a specific strategy to your circumstance based on a number of contributing factors. 3 of the most important factors we use are:
1. How you deploy your money into your investments.
2. Where you invest your money.
3. How much each investments costs to maintain.
Other topics discussed on today’s show:
– Credit Insurance…What is it and who needs it?
– Doesn’t the 5th amendment conflict with finding the truth in our justice system?
– 3D printer saves a toddlers life
– Why are so many high net worth individuals in “cash”?
– How and when you should invest in mutual funds
Listen to today’s show here: