Comments on: An Introduction to Mutual Funds http://www.getrichslowly.org/blog/2006/10/02/an-introduction-to-mutual-funds/ personal finance that makes cents Thu, 22 May 2008 19:55:31 +0000 http://wordpress.org/?v=2.5.1 By: How to Start a Roth IRA (and Where to Do It) ? Get Rich Slowly http://www.getrichslowly.org/blog/2006/10/02/an-introduction-to-mutual-funds/#comment-88831 How to Start a Roth IRA (and Where to Do It) ? Get Rich Slowly Thu, 07 Jun 2007 13:21:51 +0000 http://www.getrichslowly.org/blog/2006/10/02/an-introduction-to-mutual-funds/#comment-88831 [...] Big Three In his guest post “An Introduction to Mutual Funds”, Vintek recommended starting at one of the Big Three: Fidelity, Vanguard, or T. Rowe Price. I call [...] [...] Big Three In his guest post “An Introduction to Mutual Funds”, Vintek recommended starting at one of the Big Three: Fidelity, Vanguard, or T. Rowe Price. I call [...]

]]> By: 5 Tips For Creating A Solid Investment Plan » Silicon Valley Blog About Money http://www.getrichslowly.org/blog/2006/10/02/an-introduction-to-mutual-funds/#comment-81896 5 Tips For Creating A Solid Investment Plan » Silicon Valley Blog About Money Thu, 22 Mar 2007 15:40:12 +0000 http://www.getrichslowly.org/blog/2006/10/02/an-introduction-to-mutual-funds/#comment-81896 [...] you’d like represented and what percentages they should represent in your mix. Then settle on some good fund families with experienced managers and purchase shares in their funds. Take note of the management style, [...] [...] you’d like represented and what percentages they should represent in your mix. Then settle on some good fund families with experienced managers and purchase shares in their funds. Take note of the management style, [...]

]]> By: Raymond http://www.getrichslowly.org/blog/2006/10/02/an-introduction-to-mutual-funds/#comment-12691 Raymond Thu, 02 Nov 2006 15:19:40 +0000 http://www.getrichslowly.org/blog/2006/10/02/an-introduction-to-mutual-funds/#comment-12691 Thanks for this article. It is definately helpful, since I am deciding on where to open my Roth IRA. I started looking at the big three, but like the other comments, it seems most of the index funds require a minimum that is higher than $4,000.00. Will continue with the research. Thanks again! Thanks for this article. It is definately helpful, since I am deciding on where to open my Roth IRA. I started looking at the big three, but like the other comments, it seems most of the index funds require a minimum that is higher than $4,000.00. Will continue with the research. Thanks again!

]]> By: Get Rich Slowly » Best of October, and How to Subscribe to GRS http://www.getrichslowly.org/blog/2006/10/02/an-introduction-to-mutual-funds/#comment-12563 Get Rich Slowly » Best of October, and How to Subscribe to GRS Wed, 01 Nov 2006 20:01:03 +0000 http://www.getrichslowly.org/blog/2006/10/02/an-introduction-to-mutual-funds/#comment-12563 [...] Oct. 1st: An introduction to mutual funds (a guest entry) [...] [...] Oct. 1st: An introduction to mutual funds (a guest entry) [...]

]]> By: FIRE Finance http://www.getrichslowly.org/blog/2006/10/02/an-introduction-to-mutual-funds/#comment-10643 FIRE Finance Sun, 15 Oct 2006 23:31:12 +0000 http://www.getrichslowly.org/blog/2006/10/02/an-introduction-to-mutual-funds/#comment-10643 <strong>Round Up of Carnival of Personal Finance #69...</strong> The Carnival of Personal Finance #69 was a great carnival of information sharing with over 50 superb posts. Our post was published at Carnival #69 of Personal Finance Our post Investing - Dilbert's Personal Finance was published at this carnival. Som.... Round Up of Carnival of Personal Finance #69…

The Carnival of Personal Finance #69 was a great carnival of information sharing with over 50 superb posts. Our post was published at Carnival #69 of Personal Finance Our post Investing - Dilbert’s Personal Finance was published at this carnival. Som….

]]> By: Carnival of Personal Finance » Carnival of Personal Finance #69 http://www.getrichslowly.org/blog/2006/10/02/an-introduction-to-mutual-funds/#comment-10011 Carnival of Personal Finance » Carnival of Personal Finance #69 Mon, 09 Oct 2006 05:56:02 +0000 http://www.getrichslowly.org/blog/2006/10/02/an-introduction-to-mutual-funds/#comment-10011 [...] Get Rich Slowly has a very basic introduction to mutual funds for beginners. “In the beginning, there were stocks, and that was good… Then came mutual funds, and that was better.” (795 words; 8 comments) [...] [...] Get Rich Slowly has a very basic introduction to mutual funds for beginners. “In the beginning, there were stocks, and that was good… Then came mutual funds, and that was better.” (795 words; 8 comments) [...]

]]> By: links for 2006-10-09 « Free Hogg. http://www.getrichslowly.org/blog/2006/10/02/an-introduction-to-mutual-funds/#comment-10004 links for 2006-10-09 « Free Hogg. Mon, 09 Oct 2006 02:24:33 +0000 http://www.getrichslowly.org/blog/2006/10/02/an-introduction-to-mutual-funds/#comment-10004 [...] Get Rich Slowly » An Introduction to Mutual Funds (tags: investing money) [...] [...] Get Rich Slowly » An Introduction to Mutual Funds (tags: investing money) [...]

]]> By: Ed http://www.getrichslowly.org/blog/2006/10/02/an-introduction-to-mutual-funds/#comment-9498 Ed Tue, 03 Oct 2006 05:57:21 +0000 http://www.getrichslowly.org/blog/2006/10/02/an-introduction-to-mutual-funds/#comment-9498 I recall that T. Rowe Price charges a $10 annual fee on their IRA's also unless you have $100k in T. Rowe Price accounts. That takes a bit longer to hit than Vanguards $10k limit at $4-5k/year. I recall that T. Rowe Price charges a $10 annual fee on their IRA’s also unless you have $100k in T. Rowe Price accounts. That takes a bit longer to hit than Vanguards $10k limit at $4-5k/year.

]]> By: VinTek http://www.getrichslowly.org/blog/2006/10/02/an-introduction-to-mutual-funds/#comment-9485 VinTek Tue, 03 Oct 2006 02:44:27 +0000 http://www.getrichslowly.org/blog/2006/10/02/an-introduction-to-mutual-funds/#comment-9485 Yes, ETFs do offer 2 other benefits: they typically carry lower expense ratios and are slightly more tax efficient because they do not make distributions based on capital gains. If you're interested in index funds (which are very tax efficient in and of themselves), the ETF's advantages are slight but very real. In my mind, they are often not enough to offset the transactions costs for an "ordinary" investor squirreling away $100 per month. Yes, I agree that the minimums set a high barrier to entrance for many a small investor. Yet I have to think that if you believe that it's important to have an emergency fund covering 3-6 months' expenses before investing, sticking money into a CD until you have enough to open a fund account would not be an insurmountable obstacle. Remember again that the small investor generates proportionately more costs than a large investor. Or do you think a "fee for service" system, where every investor pays a fixed fee for the annual reports, Web site, research, etc. would be more equitable? After all, the small investor gets the same reports as the large investor, has the same online account access, etc. Do you think that the small investor's fees would go down...or up? Yes, ETFs do offer 2 other benefits: they typically carry lower expense ratios and are slightly more tax efficient because they do not make distributions based on capital gains. If you’re interested in index funds (which are very tax efficient in and of themselves), the ETF’s advantages are slight but very real. In my mind, they are often not enough to offset the transactions costs for an “ordinary” investor squirreling away $100 per month.

Yes, I agree that the minimums set a high barrier to entrance for many a small investor. Yet I have to think that if you believe that it’s important to have an emergency fund covering 3-6 months’ expenses before investing, sticking money into a CD until you have enough to open a fund account would not be an insurmountable obstacle. Remember again that the small investor generates proportionately more costs than a large investor. Or do you think a “fee for service” system, where every investor pays a fixed fee for the annual reports, Web site, research, etc. would be more equitable? After all, the small investor gets the same reports as the large investor, has the same online account access, etc. Do you think that the small investor’s fees would go down…or up?

]]> By: James Kew http://www.getrichslowly.org/blog/2006/10/02/an-introduction-to-mutual-funds/#comment-9462 James Kew Mon, 02 Oct 2006 20:35:20 +0000 http://www.getrichslowly.org/blog/2006/10/02/an-introduction-to-mutual-funds/#comment-9462 I imagine Vanguard would argue that the fees pay for the overhead of the account holding the fund. But still, the fees target small investors while giving big investors a break. (Note also for many funds bigger investors get a further break by being able to convert to the lower-charging Admiral share class.) Odd too that the maintenance fees are specific to Vanguard's flagship index funds, and don't apply on their managed funds -- why charge only on the funds which exemplify your values? (FWIW, you can sidestep the maintenance fees while staying mostly indexed by buying one of their lifestyle funds -- although make sure the asset allocation is suitable for you. I hold one of the Target Retirement funds in my IRA.) And another thing that really bugs me: high minimum investments. You need $3K to get started in *anything* at Vanguard, apart from the STAR fund. I moved here from the UK and the contrast to the unit trust indestry there is striking. In the UK fund managers fall over themselves to get small investors into ISAs (tax-free savings/investment accounts). My first one was opened with a GBP 50 initial and monthly investment. The barriers to small investment in the US seem a lot higher! So, what should a small investor with an interest in index funds do? Fidelity's minimum investment is even higher. Save up $3K and face Vanguard's charges until the balance is high enough to avoid them? Save up smaller lumps and invest in ETFs through Sharebuilder's $4 plan? For a regular investor it'd seem the mutual fund route is slightly better: no transaction charges, so you can invest small amounts more often and take benefit of dollar cost averaging. Do ETFs have other benefits? I imagine Vanguard would argue that the fees pay for the overhead of the account holding the fund. But still, the fees target small investors while giving big investors a break. (Note also for many funds bigger investors get a further break by being able to convert to the lower-charging Admiral share class.)

Odd too that the maintenance fees are specific to Vanguard’s flagship index funds, and don’t apply on their managed funds — why charge only on the funds which exemplify your values?

(FWIW, you can sidestep the maintenance fees while staying mostly indexed by buying one of their lifestyle funds — although make sure the asset allocation is suitable for you. I hold one of the Target Retirement funds in my IRA.)

And another thing that really bugs me: high minimum investments. You need $3K to get started in *anything* at Vanguard, apart from the STAR fund.

I moved here from the UK and the contrast to the unit trust indestry there is striking. In the UK fund managers fall over themselves to get small investors into ISAs (tax-free savings/investment accounts). My first one was opened with a GBP 50 initial and monthly investment. The barriers to small investment in the US seem a lot higher!

So, what should a small investor with an interest in index funds do? Fidelity’s minimum investment is even higher. Save up $3K and face Vanguard’s charges until the balance is high enough to avoid them? Save up smaller lumps and invest in ETFs through Sharebuilder’s $4 plan?

For a regular investor it’d seem the mutual fund route is slightly better: no transaction charges, so you can invest small amounts more often and take benefit of dollar cost averaging. Do ETFs have other benefits?

]]> By: VinTek http://www.getrichslowly.org/blog/2006/10/02/an-introduction-to-mutual-funds/#comment-9457 VinTek Mon, 02 Oct 2006 19:57:04 +0000 http://www.getrichslowly.org/blog/2006/10/02/an-introduction-to-mutual-funds/#comment-9457 Jim, I agree completely that Vanguard has implemented policies that have disincentivized out many of smaller investors who are just getting started. Still, $10/year beats $84/year (assuming that you're buying ETFs every month via a low-cost broker like ScottTrade) or more. Also, consider that the administrative costs of an account are the same for the small account holder as the large one. This is one small way of making the little guy shoulder a little more of the cost he's generating (i.e. a guy with a $3,000 account is generating way more in admin costs than the expense fees his account is generating). That said, there are still other firms like T Rowe Price and Fidelity Investments that do a good job, and I urge any beginning investor to fully research all their options. The nice thing about a free market is that everyone is free to invest with the company he feels best suits his needs. Jim,

I agree completely that Vanguard has implemented policies that have disincentivized out many of smaller investors who are just getting started. Still, $10/year beats $84/year (assuming that you’re buying ETFs every month via a low-cost broker like ScottTrade) or more.

Also, consider that the administrative costs of an account are the same for the small account holder as the large one. This is one small way of making the little guy shoulder a little more of the cost he’s generating (i.e. a guy with a $3,000 account is generating way more in admin costs than the expense fees his account is generating).

That said, there are still other firms like T Rowe Price and Fidelity Investments that do a good job, and I urge any beginning investor to fully research all their options. The nice thing about a free market is that everyone is free to invest with the company he feels best suits his needs.

]]> By: Jim http://www.getrichslowly.org/blog/2006/10/02/an-introduction-to-mutual-funds/#comment-9452 Jim Mon, 02 Oct 2006 18:52:59 +0000 http://www.getrichslowly.org/blog/2006/10/02/an-introduction-to-mutual-funds/#comment-9452 Vanguard: Account Maintenance Fee Each Vanguard index fund (except the REIT Index Fund) charges a maintenance fee if the balance is below $10,000. The fee of $10 is deducted annually... An annual $10 fee is generally deducted for each nonretirement fund account with a balance of less than $2,500. In addition, the fund account may be liquidated if the balance falls below $500. Traditional, Roth, and SEP IRAs. $10 a year for each fund account with a balance of less than $5,000. Vanguard is Fees Fees Fees. They shout Low Fees, but in actuality, they are not. I love their "ideals" but I won't touch Vanguard unless they get rid of these fees. The IRA fee is crazy since most people's limit per year is less than $5000. So even if someone puts in 100%, they will be slapped with a fee. This is NOT looking out for the little guys. Especially the get rich slowly guys. Vanguard:
Account Maintenance Fee
Each Vanguard index fund (except the REIT Index Fund) charges a maintenance fee if the balance is below $10,000. The fee of $10 is deducted annually…

An annual $10 fee is generally deducted for each nonretirement fund account with a balance of less than $2,500. In addition, the fund account may be liquidated if the balance falls below $500.

Traditional, Roth, and SEP IRAs. $10 a year for each fund account with a balance of less than $5,000.

Vanguard is Fees Fees Fees.
They shout Low Fees, but in actuality, they are not. I love their “ideals” but I won’t touch Vanguard unless they get rid of these fees. The IRA fee is crazy since most people’s limit per year is less than $5000. So even if someone puts in 100%, they will be slapped with a fee. This is NOT looking out for the little guys. Especially the get rich slowly guys.

]]> By: VinTek http://www.getrichslowly.org/blog/2006/10/02/an-introduction-to-mutual-funds/#comment-9447 VinTek Mon, 02 Oct 2006 17:53:19 +0000 http://www.getrichslowly.org/blog/2006/10/02/an-introduction-to-mutual-funds/#comment-9447 Well, I'm actually going to get to ETFs, but haven't gotten around to them. Thumbnail version: they're really good tools, but if you are DCAing a little every month, the trading costs can be prohibitive, relative to funds. Also, instant liquidation runs a little counter to the "Get Rich Slowly" philosophy. Why would you want quick in-and-out capability unless you were market timing? Again, I have nothing against ETFs per se. I think they're good tools. Then too, I'm troubled by the fact that as of August, of the eight sectors Lipper tracks, just one — financial services — had ETFs posting superior returns to their mutual-fund counterparts over the past 12 months. That's food for thought. http://www.smartmoney.com/etffocus/index.cfm?story=20060802 Well, I’m actually going to get to ETFs, but haven’t gotten around to them. Thumbnail version: they’re really good tools, but if you are DCAing a little every month, the trading costs can be prohibitive, relative to funds. Also, instant liquidation runs a little counter to the “Get Rich Slowly” philosophy. Why would you want quick in-and-out capability unless you were market timing?

Again, I have nothing against ETFs per se. I think they’re good tools. Then too, I’m troubled by the fact that as of August, of the eight sectors Lipper tracks, just one — financial services — had ETFs posting superior returns to their mutual-fund counterparts over the past 12 months. That’s food for thought.

http://www.smartmoney.com/etffocus/index.cfm?story=20060802

]]> By: Rich Slick http://www.getrichslowly.org/blog/2006/10/02/an-introduction-to-mutual-funds/#comment-9435 Rich Slick Mon, 02 Oct 2006 16:12:46 +0000 http://www.getrichslowly.org/blog/2006/10/02/an-introduction-to-mutual-funds/#comment-9435 I like the evolution spin you put on your post today but I would say you missed the next step. After index funds you can leap to Exchange Traded Funds. Why just sit and let the index funds grow when you could be squeezing call premiums from them? They are also far superior in that they offer instant liquidation if so desired. I like the evolution spin you put on your post today but I would say you missed the next step. After index funds you can leap to Exchange Traded Funds. Why just sit and let the index funds grow when you could be squeezing call premiums from them?
They are also far superior in that they offer instant liquidation if so desired.

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