Dave Ramsey is a good entertainer and seems like a genuinely nice person. However, regarding mutual funds, his investment philosophies border on dangerous. It is possible to glean a few good mutual fund investment tips from his talk radio show, but any investor is wise to understand the difference between entertainment and sound investment practices. Armed with sound insight on mutual funds, investors can do well to build their own portfolios. But remember that mutual fund research, analysis and portfolio management is not for everyone. If you don’t enjoy doing it, chances are you won’t be good at it.
How does one reduce taxes on mutual funds? Which types of funds are best for taxable accounts? Why did you receive a 1099? Understanding mutual fund taxation will help improve your overall returns by being a smarter investor. As the saying goes, ”Nothing is sure in life but death and taxes.” However, taxes can be minimized or even avoided with regard to mutual fund investing. Basic knowledge and practice on mutual fund taxation enables an increase in your overall investment portfolio returns.
Mutual Funds Are Liquid. If you need to withdraw money from your brokerage account, you can get cash from most mutual funds within a few days. If you want to sell your mutual fund, the proceeds from the sale are available as soon as the day after you sell the mutual fund. Some mutual funds have a ”settlement” period of up to three days. But this level of liquidity (quick access to your money), is much better than some investment assets, such as real estate. Mutual Funds Have Audited Track Records : A mutual fund company must maintain performance track records for each mutual fund and have them audited for accuracy, which ensures that investors can trust the mutual fund’s stated returns. Mutual fund companies also offer a prospectus for each fund, as well as semi-annual or annual reports. These documents provide a wealth of information about how the fund invests, the amount of assets under management, the internal fund expenses, and more.
Professional Management: Mutual Funds Have a Team of Professionals Researching and Analyzing Investments So You Don’t Have To! Perhaps the greatest benefit of all is that investors can save countless hours of time, energy and frustration involved with the research and analysis required to find quality investments to hold in a portfolio. That’s not to speak of the skill, desire and patience required to do a job well in any professional pursuit. Mutual funds enable investors to do more of the things in life they enjoy rather than spending time and energy on investment matters.
In different words, Mutual funds can be considered baskets of investments. Each basket holds dozens or hundreds of security types, such as stocks or bonds. Therefore, when an investor buys a mutual fund, they are buying a basket of investment securities. Simple! Yes, there are many things to know about mutual funds but compared to the broad world of financial products, mutual funds are quite easy to use and understand.
Building Wealth Mutual Funds. Mutual funds are the best way for the most people to build wealth. Not everyone can become a successful business owner or rise to the top ranks of a large corporation. But saving and investing for the long term with mutual funds can be accomplished by almost anyone. While there are a plethora of investment options (individual stocks, ETFs, and closed-end funds, to name a few) a mutual fund can offer a simple, efficient way to invest for retirement, education or other financial goals.