A Beginner Invests in Mutual Funds for Wealth

A Poor Man's Guide to Mutual Funds

(MP) If you are that guy or gal new to mutual funds and you have very little money to invest –you’re in the right place. I’m going to try to show you how to invest your hard-earned cash, make more of it, and not lose your shirt in the process.

So, how much money does a beginner need to have in their account to invest? Well, you are only limited by the least amount required by a brokerage firm or investment company to open an account. Some brokerage houses have no required minimum account balance. More than 50 mutual funds have minimum purchase requirements of $100 or less, including monies offered by Fidelity, AssetMark, USAA and Oakmark. Basically $100 dollars can get you in an investment account.

What exactly are mutual funds?

A mutual fund is when a company pools money from many investors and invests the money in securities such as stocks, bonds, and short-term debt. The joint holdings of this kind of account are known as a portfolio. These accounts also charge management fees. Smart investors will want to make sure the fund fees are low. If the investment account carries an upfront fee of 5.0%, the investor is starting out with a significant loss on their monies. In almost all situations, no-load funds are a better choice. No-fund loads are accounts in which shares are sold without a commission or sales charge.

Poor Man's Guide to Investing
Are you on the right track?

Stocks or Mutual Funds?

I recommend – both securities and MF’s. MFs are an investment in many different securities that provide necessary stability against sudden fluctuations in any given market. Although these accounts rarely offer significant returns like individual stocks – they’re a nice place to get started.

These accounts allow investors to cut most of the risk associated with individual stocks through the portfolio concept. By holding more stocks or securities in a portfolio, it’s possible to lower the impact of a single company under performing relative to expectations. By purchasing shares in an MF – you are really purchasing a portfolio of stocks and/or bonds, and that mix lowers the overall risk of your investment. That’s because when someone buys an individual stock in a company, they’re taking on two kinds of risk:

The first risk has to do with macroeconomic factors. For example, an industry could suffer a downturn in future outlook or economic factors might affect the cost to borrow money, and stocks could enter a bear market.

Second, you risk staying poor every minute that goes by and you’re not investing money that has a chance to grow into something meaningful, like a million dollars for your retirement. So, there are risks involve. But, don’t let risk place fear in your heart. You risk poverty every minute you’re not investing money

There’s also rewards that come with investing in these accounts. Just consult a professional financial adviser, upgrade your investment skills (learned here and there) to speed you on the road to financial success. Once you have the right mix of accounts — all that will be required to invest is deciding where to put your money. You won’t have read corporate balance sheets, annual reports or scan Kiplinger and Forbes online. But, you might want to. I do. You just pick which account and you automatically get built-in diversification and investment decisions made by a professional money manager.

Join your neighbors

When it comes to investing you could do a lot worse with your money. How has much-wasted money gone out your household over the past year? Think about it, then check out “Common Ways Americans Waste Money” for helpful insights. Just go for it and stay on top of the game by picking monetary resource over bonds, or cash and rebalance your money every year. Your goal is to keep your cash where you want it to be. Remember when you invest in these accounts, you have lots of company:

  • The total value of Americans holding mutual funds is over $7 trillion.
  • Equity funds were the most commonly owned type of mutual fund, held by 80 percent of mutual fund–owning households. Thirty-eight percent owned hybrid accounts, 48 percent owned bond accounts, and 66 percent owned money market accounts. In addition, 43 percent of mutual fund–owning households also owned global or international funds.

How to add money

The price of one share of a mutual fund is usually quoted in terms of NAV, or Net Asset Value. This is a number that can be found online or in the newspaper. Investing is fairly easy since most brokerage houses allow investors to add money through automatic withdrawals from a bank account. This can help you build up an investment portfolio over time, which is a less painful approach. Now let’s get into Measuring the Performance of Mutual Funds. You really don’t have to be rich to began investing.

How about stocks?

Try Scottrades’s $7 Online Stock Trades. And yes, this is an sponsored link. They help keep this site free allowing you to start investing without stealing the shirt right off your back. You can also Trade Binary Options online with the easy to learn ABS system. It’s automatic and you don’t need to be a seasoned trader to make money. If you’re really looking to leave poverty behind, try mutual funds today!

Don Briscoe
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Don Briscoe

Finance educator, advisor, and leading voice in the global financial literacy movement.Founder and editor of MoneyPacers.com.He lives and enjoys life with his family in New York.
Don Briscoe
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One thought on “A Beginner Invests in Mutual Funds for Wealth

  1. Hi Sherry, while becoming an aggressive investor, it’s possible to make a house down payment in six months, I would caution you to do your homework on the fund you’re investing in. Do you have a brokerage account, Roth IRA, Traditional IRA, or other account at a stock broker such as Charles Schwab or Merrill Lync? You can also buy most mutual funds just like you would a share of stock. You simply go to the broker’s website, walk into the nearest branch office, or call your broker on the telephone and tell them the ticker symbol of the mutual fund you want to purchase and the total amount of money you want to invest. If you know you want to have your money invested in a specific mutual fund or in mutual funds that make up part of a larger mutual fund family, you can often open an account directly with the mutual fund itself. Again, do your homework.

  2. On top of Being poor, I’m a beginner!! But my motivation is to make a good return on my investment in 6 months, I need house downpayment $

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