Can any one Explain about mutual Funds?

Hello
I want to invest Some amount in Mutual Funds, But i don't Know How to start So Please help Me .

Comments (49)

 
Dec 31,2017

Going to echo my main man Burton Malkiel here.

Step 1.) Don't invest in a mutual fund.

After the mutual fund's management fees, sales fees, advisory fees, profit sharing fees, breathing fees, and fees for having fees... don't forget about those taxes too (ouch). The margins are around the same as a long S&P 500 portfolio.

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Dec 31,2017

Good old Malkiel...

As Keyser said, stick to Malkiel. Before buying any shares in a mutual fund invest some money in "A Random Walk Down Wall Street"

 
Dec 31,2017

are you fucking for real

heister:

Look at all these wannabe richies hating on an expensive salad.

 
 
Dec 31,2017

Basically for individuals to pick a stock is actually to pick a good company. You wanna find the undervalued/potential companies to invest in. To do that you need to do some research by yourself. Checking the financial of your target company is a good thing to start.

How is the revenue/sales/capacity in the past five yrs and how is the expected r/s/c in next three years?
what is the recent govermen policy of the industry you are looking at?

Also comparing p/e, p/b ratios within the industry would help. They don't mean anything seperately but can help you grasp a sense in the grand picture. Index stocks, like s&p 500 or small companies index, can also be interesting to look at.

I am also a college sophomore currently interning for a F50 company under their Asset Management arm. When you have an internship on buy side then things get a bit easy cuz you have plenty of research reports from sell side and the screening process of your firm could also be helpful for your learning. So a buy-side internship will definitely help, especially portfolio management group (Well it's hard to land it, I know)

I would also recommend you to read books wrriten by Peter Lynch. "Learn to earn" could answer your questions about how to start. "Beating the street" & "One up on wall street" also introduce some interesting investment ideas.
"Reminiscense of a stock operator" is a must-read, i would say.

Hope this can help. PM me if you have any other quesitons

 
Dec 31,2017
Xaipe:

Basically for individuals to pick a stock is actually to pick a good company. You wanna find the undervalued/potential companies to invest in. To do that you need to do some research by yourself. Checking the financial of your target company is a good thing to start.

How is the revenue/sales/capacity in the past five yrs and how is the expected r/s/c in next three years?
what is the recent govermen policy of the industry you are looking at?

Also comparing p/e, p/b ratios within the industry would help. They don't mean anything seperately but can help you grasp a sense in the grand picture. Index stocks, like s&p 500 or small companies index, can also be interesting to look at.

I am also a college sophomore currently interning for a F50 company under their Asset Management arm. When you have an internship on buy side then things get a bit easy cuz you have plenty of research reports from sell side and the screening process of your firm could also be helpful for your learning. So a buy-side internship will definitely help, especially portfolio management group (Well it's hard to land it, I know)

I would also recommend you to read books wrriten by Peter Lynch. "Learn to earn" could answer your questions about how to start. "Beating the street" & "One up on wall street" also introduce some interesting investment ideas.
"Reminiscense of a stock operator" is a must-read, i would say.

Hope this can help. PM me if you have any other quesitons

Pretty sure he's wondering about funds not specific securities to invest in. OP, I've found vanguard funds to be a good deal as their fees are very low and they do a good job explaining what each fund does/aims for. I would check these out.

 
Dec 31,2017

Are you in the UK? I'm not, so I don't know which companies are the best, but I'm sure Charles Schwab, E*Trade, Barclays, HSBC, etc. offer individual brokerage/retirement accounts and tons of info about retail investing and retirement planning on their websites.

The most important thing to do is to save as much as you can and start as early as you can. If you are a sophomore and starting to think about this, then you are ahead of the curve. Most people don't think of these things until they get their first "real" job after college.

As far as what to put your money into, well my theory is either go all in and manage your money yourself by picking individual stocks, bonds, etc. or just put your money in an index fund and don't worry about it. If you decide to go the MF route and want low-risk pick a MF with a mix of half stocks and half bonds.

"Hope for the best. Prepare for the worst. Capitalize on what comes."

 
Dec 31,2017

Read Graham Dodd Security Analysis or just get an ETF that mirrors the FTSE

 
Dec 31,2017

As you're in the UK you may want to invest using an ISA as it is a tax-efficient wrapper, unless your company offers you a SIPP and you are happy to have your money tied up in a retirement fund. If your capital base is low most of your money will be eaten up by fees if you try to buy and sell stocks and the churn will kill you. In the UK you usually pay PS10/trade, so PS20 to buy and exit a position. If your capital base is small I would suggest building a portfolio using cheap index funds or ETF's and just keep adding a monthly amount to your portfolio via direct debit. Over time this will do very well and avoid the fees that closet index hugging "active managers" charge you. If you are hell bent on picking stocks, to avoid the fees you need to be a long-term buy and hold guy, otherwise the PS10/trade will kill you.

As for brokers, in the UK TD Waterhouse are good, and most of the banks build their platform around them.

Best of luck!

 
Dec 31,2017

Check out the Schwab ETFs. No transaction fees and lower than average operating fees. The catch is you need to have an account with Schwab.

 
 
Dec 31,2017

The majority of investing Americans know nothing about the optimal level of risk. They are in high fee funds because FA's sell them to them.

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Dec 31,2017

There's a lot of academic literature suggesting the futility of active management. But mutual funds will always be popular because they're an easy package to get. With so many options out there (value, growth, balanced, high yield income, international, etc.) and the perceived diversification/expertise, it's easy for many investors to end up choosing a product as they see fit. A lot of it is how they're marketed. I guess some people don't really care to look into the high fees. But this isn't to say that there aren't any solid funds out there with great track records, dedicated PMs, and relatively low expense ratios. You will encounter many that serve as decent long-term investments. But of course if you want to track an index, an ETF would be a cheaper (and more liquid) option compared to passively managed funds.

 
Dec 31,2017

Keep in mind when dealing with historic figures that ETFs are relative newcomers to the market. The only ETFs available 20 years ago were Van Kampen muni bond funds, and they performed horribly (and managed to have high expense ratios to boot).

Your bottom line assumption is correct, however. Mutual funds are a sucker's bet.

 
Dec 31,2017

Studies have shown that American's typically focus only on the return the fund makes (not net of fees). This is why you'll see people investing in S&P500 indexes that have very high expense ratios when they can do just as well in say, Vanguard's index fund.

 
Dec 31,2017

I would rather invest in a mutual fund with 20 years of history and the same manager versus a new ETF with no history and an unproven manager.

High fees are only justified when the fund is investing in foreign securities including sovereign debt.

 
Dec 31,2017

The whole mutual fund model is so flawed. It means well and sounds great with all the talk of diversification but it's all B.S.

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Best Response
Dec 31,2017

"Fund size erodes performance" is a pretty uncontroversial statement. The main issue is "how much does it erode performance?"

Kahn and Shaffer wrote a paper that developed a strategy alpha vs. capacity model (http://www.iijournals.com/doi/abs/10.3905/

There's a few issues behind this, but two of the biggest are trading costs and alpha/idea strength.
If a fund gets new money, they can either plow more money into their existing high conviction ideas (incurring higher trading costs on entry/exit) or they can go to the next idea on their buy-list and put the money into slightly lower conviction ideas. At the margin, this isn't a big deal if you already have an extremely diversified portfolio, but it is a problem if you have a 20 stock portfolio,

Generally, higher turnover strategies are always more affected by AUM, and strategies being run in areas with greater available alpha or lower available liquidity (small cap vs large cap) are more affected.

1999: https://umdrive.memphis.edu/cjiang/www/teaching/fi...
2002: http://papers.ssrn.com/sol3/papers.cfm?abstract_id...
2002: http://www.iijournals.com/doi/abs/10.3905/

2003/2004: http://papers.ssrn.com/sol3/papers.cfm?abstract_id...
2004: http://faculty.chicagobooth.edu/john.cochrane/teac...
2007: http://papers.ssrn.com/sol3/papers.cfm?abstract_id...
2008: http://journals.cambridge.org/action/displayAbstra...

 
Dec 31,2017
raisondebtre:

"Fund size erodes performance" is a pretty uncontroversial statement. The main issue is "how much does it erode performance?"

Kahn and Shaffer wrote a paper that developed a strategy alpha vs. capacity model (http://www.iijournals.com/doi/abs/10.3905/

There's a few issues behind this, but two of the biggest are trading costs and alpha/idea strength.
If a fund gets new money, they can either plow more money into their existing high conviction ideas (incurring higher trading costs on entry/exit) or they can go to the next idea on their buy-list and put the money into slightly lower conviction ideas. At the margin, this isn't a big deal if you already have an extremely diversified portfolio, but it is a problem if you have a 20 stock portfolio,

Generally, higher turnover strategies are always more affected by AUM, and strategies being run in areas with greater available alpha or lower available liquidity (small cap vs large cap) are more affected.

1999: https://umdrive.memphis.edu/cjiang/www/teaching/fir7410/Readings/fundsize.pdf
2002: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=327960
2002: http://www.iijournals.com/doi/abs/10.3905/

2003/2004: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=510325
2004: http://faculty.chicagobooth.edu/john.cochrane/teaching/35150_advanced_investments/berk_green_jpe.pdf
2007: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=951367
2008: http://journals.cambridge.org/action/displayAbstract?fromPage=online&aid=4209104

Very helpful! Silver banana for you.

 
 
Dec 31,2017

Morningstar.com and valueline.com

The below hedge fund directory explains a number of strategies that are employed by bothe hedge funds and mutual fund managers:
http://www.hedgetracker.com/directory.php

 
Dec 31,2017

I would agree with the above post, but you could also try Marketwatch.com. Very informational but does not have the reputation of Morningstar.com. You can also visit the direct websites of any of the funds your interested in.Good luck

 
 
Dec 31,2017
 
Dec 31,2017

Find someone with morningstar direct and you can get your task done in less than 5 mins.

 
Dec 31,2017
 
 
Dec 31,2017

First, depends on what type of mutual funds you want to invest in. Some are very specialized and some are broad. There are bond mutual funds, specific equity mutual funds, etc. Morningstar is good. Investopedia helps with the terminology. Looking at the mutual fund's website though is the best. It gives in-depth details about the mutual funds and how they diversify their investments.

 
Dec 31,2017

Not exactly a mutual fund, but check out iShare ETFs.

 
Dec 31,2017

If you are near your college campus, try using your school's Morningstar log-in. Ask a professor for it, that's how I managed to prep and get information for some mutual fund interviews last year as an SA.

The rating system is so-so but they really got the universe/organization thought process that would be beneficial foundation for your search.

 
Dec 31,2017

For what it's worth, I think Morningstar is horrible. Their whole business model is based on an enormous conflict of interest because mutual funds pay Morningstar for various services. Separately, there is a whole host of academic papers describing how mutual funds under perform the broader market (because mutual fund managers generally are not skilled, and then they take fees). Your best bet is to just dollar cost into a Vanguard index fund.

 
 
Dec 31,2017

Why pay their fees? Just make your own personal portfolio. Who said you have to trade a personal account. Just buy some solid dividend payers, keep a diverse portfolio based on your risk sensitivity.

 
Dec 31,2017

Since the author has neither interest in the leg work, or skills and training, nor seems inclined to consider the time spent fun, I would conclude that he should stay well away from stock picking. His strategy should be passive indexing with broad indexes using either ETFs or low-fee index mutual funds.

Starting a brokerage account to buy ETFs creates all kind of mental drivers to trade (to your detriment) but index mutual funds may have a higher cost to purchase. Best to find the MF with the lowest cost to purchase - eg TD Ameritrade i-funds.

 
 
Dec 31,2017

What do you mean? As long as it's a listed fund you should be able to purchase it with any broker.

 
 
Dec 31,2017
 
Dec 31,2017

Ackman did that with Pershing Square IV, worked out realllll welll

 
Dec 31,2017

Seems like a great way for corrupt individuals to funnel fees to their buddies without people recognizing what is going on.

This to all my hatin' folks seeing me getting guac right now..

 
Dec 31,2017

cuz there some many people and companies to buy it.... pension funds... family wealth groups.... that what it is... try to go for a brazilian and tell him to change his 12% to 15% year profit with fixed incomes to some volatility...

 
Dec 31,2017

How much leverage can these funds put on?

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Dec 31,2017

Thanks for the nice discussion about the Mutual Fund Decoder. It can really help to find best resource for Mutual Fund.

 
Dec 31,2017