SERIES: YOU Answer The Question – Part 2

Welcome to the latest series – YOU Answer The Question!

One thing that I love about traveling and teaching about finances is that I learn so much from the people I meet!

So here is how this series works.  I will share a question that has been sent in to me, and YOU Answer The Question!

QUESTIONI want to work on getting some mutual funds, but I haven't the faintest idea where to start …  Do I just go to Fidelity and say "I want some mutual funds" or what?

Share Your Answer!


  1. Travis on June 10, 2008 at 3:47 am

    this was our path….

    We started with the fact that,

    There Is Safety In the Multitude Of Counsel.

    Step 1
    We began to educate ourselves by first seeking out the advisors/administrators through our company 401k plans. Just to get someone to sit down with and find out basics about mutual funds.

    Step 2
    Then we did online reading about mutual funds at sites like yahoo, morningstar… This part was prob. the most overwhelming because there is soooo much information and you are kind of relying on only yourself to discern the good from the rest.

    Step 3
    We chose a brokerage firm that sold many fund families. (AG Edwards) Called them up, sat down with a representative and he listened to our story. He made some recommendation of things he liked for us.

    We went home compared out notes from the three steps and made purchased decisions and went back to the AG Edwards rep and made our purchases.
    (side note: We did not buy everything he suggested. It didn’t even phase us or him. He knew we valued his input, but that this is our money and it is up to us to the the best we can with it.)

    ***important point***
    (if married) Do yourself a favor…don’t let the spouse cop-out and give you the whatever!! You NEED both people. God gives you each a set of wisdom and perspective and without both you. You are doing such important stuff with only 50% of you resources. (besides…win our loose, we are doing it together.

    Good Luck!!

  2. josh on June 10, 2008 at 5:13 am

    I would not buy mutual funds. The regulations on mutual funds allow the mutual fund company and brokerage to keep the majority of the profits (I have heard up to 90%, but I have no source for that). You will share the profit with somebody on most any investment you make but mutual funds seem especially excessive.

  3. Andy on June 10, 2008 at 10:48 am

    This is in response to Josh’s comments regarding mutual funds…

    All mutual funds have stated expense ratios. These represent the annual fees which include the management costs, marketing, etc.

    For a fund w/ an expense ratio of 1.0%, you would pay $10 on a $1,000 investment.

    Load funds (typically purchased through a broker) also include a commission or sales fee.

    I would generally stick w/ no-load funds, although if you are a beginner, you typically would be purchasing funds via a broker, so you would probably be “stuck” with the load fund offerings.

    Fees can make a huge difference in your returns, so definitely be aware of how much you are paying.

  4. chris on June 10, 2008 at 2:05 pm

    Joe, that’s an excellent question. And one that there is probably no 100% correct answer to. And that’s why so many people are so afraid of the investing portion of their financial plan.

    Travis essentially did the same thing as you pondered in the question by “just going to Fidelity”. Whether it is the funds retail store or web site like Fidelity’s or a brokerage such as A. G. Edwards, you will get a set of recommendations or things to look at based on your investment profile. These places should do a profile based on age and temperament toward risk of loss and suggest a diversified plan.

    Disclosure, I do use Fidelity for my Roth and they have been very helpful by the way.

    Once you get their suggestions, ask questions. How does the suggested funds compare against their peers. Where can I do research and how. Ask what to look for such as fees, types of investments and other things that make their choice or one that you find worthwhile.

    Make them educate you on what is important and what matters.

    Learn that in some cases, based on minimum purchase, you may only be able to invest in one fund and not be as diversified as your profile may have suggested.

  5. Brady on June 10, 2008 at 2:37 pm

    It is hard to beat the market, especially once you add in high expense ratios common to mutual funds. It is very easy, however, to under perform the market.

    Index funds are my choice because of this. They are mutual funds representing an entire stock exchange or market segment. Because they have a predetermined ratio of holdings based on the market composition, there is very little management needed to keep the fund active. This translates into less fees for you.

    You can get indexes for many different markets. I like Vanguard’s S&P 500 index (VFINX). I picked Vanguard over Fidelity simply because of a lower minimum investment ($3,000 to open an account). However well the S&P 500 is doing, that is how well I am doing. I will make or lose the same amount as the market. And since the stock market has fared well over the past 100 years, that is fine with me. I should average somewhere around 11% annually.

  6. David Nanney on June 11, 2008 at 3:35 am

    for a new investor (or novice investor), has some sample portfolios available, as well as suggestions for many large company 401(k) plans. These guys also do a weekly podcast.

    In their podcast, they compared data from their recommended portfolios versus the market and their asset allocation outperformed the market.

Leave a Comment