Nine Timeless Rules for Investing in Mutual Funds (and ETFs)
by John Markese
It is surprising how seductive any article can be that proposes some arbitrary number of rules for doing something you are even remotely interested in. So please excuse my use of this artifice because if you invest in mutual funds or exchange-traded funds, or are contemplating investing in them—I desperately want you to pore over these rules.
Share this article
Rule #1: Understand what the fund invests in and the fund’s investment approach before you invest.
Sounds like common sense and simple, but not enough investors take the time to review a prospectus and an annual report.
First, read carefully the investment objective of the fund:
- Will the fund pursue growth in capital, emphasize income, or use a combined approach?
- Will the investment emphasis be on domestic or international stocks, or some combination?
- Will the fund be broadly diversified—in the case of a stock fund, covering diverse industries and stock size categories (large-cap, mid-cap, small-cap)—or will it be concentrated in a few industries?
- Will the manager be effectively fully invested at all times, or will some form of market timing be employed?
To read more, please become an AAII member or CLICK HERE.