Buying up some mutual funds.

[Joe826]

I'm looking to invest a few thousand dollars in some mutual funds now, and potentially (hopefully) alot more in the near future. I've had my eye on the Vanguard funds since they look like they've done consistently well. Specifically I was thinking about the wellington funds or the windsor funds. Is there anyone who thinks my money would be better invested elsewhere? I'm willing to accept a moderate level of risk.

Also, if I do go with Vanguard, it would probably be best for me just to open an account there instead of getting an account through an online broker like Ameritrade right?

Thanks.

[natedogg]

All my (amateur) research has led me to believe that ETFs are better than funds.

natedogg

[Ray Zee]

if you must buy funds vanguard are better than almost all others. why not just use their picks from their funds and buy the stocks and sit on them. this way you arent having your money churned to raise more buyers for their funds by dumping out of favor stocks and puttin in ones that are in the spotlight.

[parttimepro]

[ QUOTE ]
All my (amateur) research has led me to believe that ETFs are better than funds.

[/ QUOTE ]
It depends on whether you're going to invest once, or increase your investment every month or so. If you only invest once, the lower fees charged by ETFs are better. If you're buying every month, the extra commissions you need to pay to buy ETFs outweigh the lower fees.

[Joe826]

i could do this but I imagine the cost of buying several hundred different stocks would be far more than whatever vangaurd is going to charge me. As far as I could tell, I think it was like $10 or $20/year max.

[parttimepro]

Yes. The point of mutual funds, or at least index funds, which is what you should buy, is cheap and easy diversification. Vanguard I think will charge an account fee of $10/year for accounts less than $50,000, and expense ratios are something like 0.18%. For an investment of a few thousand, this is much cheaper than buying even a few individual stocks.

Index funds don't "churn" to follow momentum, so that is not a concern.

[TGoldman]

[ QUOTE ]
It depends on whether you're going to invest once, or increase your investment every month or so. If you only invest once, the lower fees charged by ETFs are better. If you're buying every month, the extra commissions you need to pay to buy ETFs outweigh the lower fees.

[/ QUOTE ]

Not necessarily. If your amount invested is very large, then it still makes sense to stick with ETFs even if you will incur many small transaction fees. This makes sense if the amount you'll save in maintenance fees (Often between 0.5% and 1%) exceeds the costs of the commissions. For most people, though, you are correct that small time investors are better off at least starting off with no-load mutual funds in order to reduce transaction costs.

[natedogg]

If you do buy a fund, I have had the best results with Masters Select Equity (MSEFX).

natedogg

[RunDownHouse]

[ QUOTE ]
If you do buy a fund, I have had the best results with Masters Select Equity (MSEFX).

natedogg

[/ QUOTE ]
...orrrrrr you could just look up the various returns of various funds and compare them with the S&P or appropriate index.

[Joe826]

[ QUOTE ]

...orrrrrr you could just look up the various returns of various funds and compare them with the S&P or appropriate index.

[/ QUOTE ]

You mean just to determine whether or not I should put my money in an EFT or funds? I'm a complete noob at this /images/graemlins/grin.gif.

[Ray Zee]

who needs or wants several hundred stocks.
buy a few each year and as time goes by you have you own fund. some time go look at a bunch of stocks and see how they compare to the index. you will see that most stocks follow reasonably close ties to how the general market does.
when the tide comes in boats go up and when it goes out they go down. that old saying is closely related to how stocks generally do.

[player24]

[ QUOTE ]
I'm looking to invest a few thousand dollars in some mutual funds now, and potentially (hopefully) alot more in the near future. I've had my eye on the Vanguard funds since they look like they've done consistently well. Specifically I was thinking about the wellington funds or the windsor funds. Is there anyone who thinks my money would be better invested elsewhere? I'm willing to accept a moderate level of risk.

Also, if I do go with Vanguard, it would probably be best for me just to open an account there instead of getting an account through an online broker like Ameritrade right?

Thanks.

[/ QUOTE ]

My two cents - First off, within the equity mutual fund universe, you can choose between actively index funds (which attempt to replicate the performance of a broad market index such as the S&P 500) or actively managed funds (which utilize a team of analysts and portfolio managers to try to select securities which will outperform the market). Index funds come with much lower expense ratios (they are relatively inexpensive to manage) and they generally achieve their objective of providing "market" performance. Vanguard and Fidelity are the leaders in this space and have a variety of options with very low expense ratios (under 0.2% per annum). Personally, I own FSTMX (Fidelity) which replicates a total market index (thousands of stocks). A less diversified and/or actively managed fund will have more a more volatile return profile than a well diversified, passively managed index fund.

For experienced investors, I would advise ownership of a market index fund (or ETF) as a portfolio cornerstone which can be supplemented with careful selection of individual stocks or actively managed funds (and/or an active short-term trading strategy, if you know how to apply technical analysis).

If you are just starting out, begin with a low cost index fund from Vanguard or Fidelity. If you branch out to actively managed funds, be careful not to assume that recent historical performance is a reliable indicator of future performance, avoid load funds unless you value the services of a financial advisor, pay attention to expense ratios (international funds are highest, small cap is high, large cap domestic should be lower), and avoid extremely large funds - these $5 billion +funds are constrained by their size and cannot pursue their strategy in a value-added manner.

[Your Mom]

FYI, you can do systematic mutual fund purchases at Ameritrade for a one time fee of 17.99

[deathtoau]

Or you can buy mutual funds for no transaction fees at Scottrade.

[gvibes]

I think the following site provides a good comparison between index funds and ETF's.

http://www.altruistfa.com/etfs.htm

[Your Mom]

[ QUOTE ]
Or you can buy mutual funds for no transaction fees at Scottrade.

[/ QUOTE ]

True, if they are part of that program. Otherwise, it is $17 and then $2 for each systematic purchase.

[Carl_William]

"Also, if I do go with Vanguard, it would probably be best for me just to open an account there instead of getting an account through an online broker like Ameritrade right?"

Yes if you go with Vanguard Group, you should definitely open an account with VG. Also I recommend that you set up the Vanguard account with your bank checking account. Doing this makes it real simple to transfer money to and from Vanguard and the bank. I also buy all the VG mutual funds via the Internet.

If you use a broker such as you described, you will be spending extra money when you buy the VG fund and when you sell it. Go with Vanguard all the way.

I suggest you buy the book by William Bernstein "The Four Pillers of Investing" (lessons for building a winning portfolio). Read the book until you understand what Bernstein is saying. If you are new to investing (or even an experienced investor) , you may have to go over some of the material in the book a few times to get the gist of it.

Somebody mentioned ETFs. They are great, but the spread on some of the thinly traded ETFs can cost you lots of dough. SPYs , QQQs, & QQQQs have reasonable spreads. Also brokers charge to buy and sell ETFs. ETFs also have expenses (expense ratios) like mutual funds, but thery are usually pretty low or reasonable. If you decide to buy ETFs, then learn the ropes about ETFs before you buy them.