67
votes
Accepted
What is the worst thing that can happen with my investment in mutual funds?
From a comment:
do I lose the principal amount too?
You misunderstand what investing means: when you buy stock shares (directly, or indirectly via a mutual fund) with your money, you buy those ...
- 50.5k
51
votes
Accepted
Should I sell mutual funds that are performing well or poorly first?
In most situations it doesn't matter, but not because it is gambling. The only reason it would matter is if you had a bump in income and are expecting a higher marginal tax bracket in the year you ...
- 52.9k
48
votes
Should I open a Roth IRA or invest in the S&P 500?
Your question indicates confusion regarding what an Individual Retirement Account (whether Roth or Traditional) is vs. the S&P 500, which is nothing but a list of stocks.
IOW, it's perfectly ...
- 50.5k
45
votes
What does 'mutual' mean in mutual fund?
"Mutual" as in "owned and funded by a pool of investors for a shared purpose". Some more details on the more generic concept of a "mutual organization" can be found in ...
- 162k
44
votes
Accepted
Is putting money in a 401(k) plan risky?
Mutual fund investments within a 401(k) plan (or outside a 401(k) plan for that matter,) are NOT covered by the FDIC regardless of whether the plan administrator is FDIC-insured or not; they are not ...
- 31.6k
39
votes
Accepted
Is 401k as good as it sounds given the way it is taxed?
Your analysis is not comparing apples to apples which is why it looks like investing money in a non-qualified account is better than a 401k (traditional or Roth).
For the non-qual you are using post ...
- 2,427
39
votes
Accepted
What should I do with the stock I own if I anticipate there will be a recession?
The answer to this question depends heavily on your ability to accurately predict a recession.
Hypothetically speaking, if you were 100% accurate with your prediction, the obvious choice would be to ...
- 2,232
34
votes
Does dollar-cost averaging just means taking risk later?
The paper you are referring to is likely the Vanguard report Dollar-cost averaging just means taking risk later.
The thrust of the paper is that lump sum investing outperforms dollar cost averaging ...
- 5,097
28
votes
Is putting money in a 401(k) plan risky?
Investments are usually insured by SIPC instead of FDIC, however it is a different kind of protection. Essentially it just protects you from the broker going under, not the investment losing value.
...
- 52.9k
26
votes
Why a bank would propose a depositor to invest part of their money to mutual funds, instead of bank doing it itself?
Banks investing their depositors money is extremely, and systemically, risky. What if those investments lose money, even if just for a little while? The bank could collapse and the depositors could ...
- 2,365
22
votes
What are the important differences between mutual funds and Exchange Traded Funds (ETFs)?
Behind the scenes, mutual funds and ETFs are very similar. Both can vary widely in purpose and policies, which is why understanding the prospectus before investing is so important.
Since both mutual ...
- 115k
22
votes
Accepted
Is losing money in my 401K normal?
Depends on how the money is invested within the 401k... but in general, prices move both up and down with a long-tem bias toward up.
Think of it this way: with fund shares priced lower now, you are ...
- 41.5k
21
votes
Why would a long-term investor ever chose a Mutual Fund over an ETF?
First, it's not always the case that ETFs have lower expenses than the equivalent mutual funds. For example, in the Vanguard family of funds the expense ratio for the ETF version is the same as it is ...
- 2,075
21
votes
If a mutual fund sell shares for a gain, do investors need to pay capital gains tax twice?
Yes, you pay capital gains tax on ETF holdings just like mutual find holdings, but you are not "double taxed".
Say you buy a fund at the beginning of the year and sell it at the end of the ...
- 129k
20
votes
Why don’t index-tracking mutual funds corner themselves?
There are several things to keep in mind:
First, as Dilip's answer says, there are many indices, with different aims, so the number of "hot" stocks that someone would need to potentially target is ...
- 9,096
20
votes
Why a bank would propose a depositor to invest part of their money to mutual funds, instead of bank doing it itself?
There are a few things going on here.
First, banks can't just invest all their depositors' money in mutual funds. Banking relies on the idea that when you deposit money today, the bank will definitely ...
- 1,097
20
votes
Should I sell mutual funds that are performing well or poorly first?
Looking at past performance of stocks when making decisions is a common fallacy in stock investment. Past performance is irrelevant. All that matters is whether you expect the stock to raise or fall ...
- 23.8k
17
votes
Accepted
Should I care about expense ratios?
You absolutely should consider expenses.
Why do they matter when the "sticker price" already includes them? Because you can be much more certain about what the expense ratio will be in the future ...
- 23.9k
17
votes
Accepted
Why do people invest in mutual fund rather than directly buying shares?
Buying the right shares gives higher return. Buying the wrong ones gives worse return, possibly negative. The usual recommendation, even if you have a pro advising you, is to diversify most of your ...
- 41.5k
15
votes
Should I be disappointed with my investment returns?
Unfortunately, yes, I think I would be disappointed.
For an investment that grows from $46,000 to $58,000 in 10 years, the Compound Annual Growth Rate (CAGR) is 2.35%.
The CAGR of the S&P 500 ...
- 115k
15
votes
Is 401k as good as it sounds given the way it is taxed?
There are 3 options (option 2 may not be available to you)
Traditional 401k
Roth 401k
Taxable investment account
When you invest 18,000 in a Traditional 401k, you don't pay taxes on the 18k the year ...
- 1,191
15
votes
What should I do with the stock I own if I anticipate there will be a recession?
If I anticipate a recession should I sell the stock I have,
That's market timing.
and then wait for everything to bottom out and then resume dollar-cost-averaging? Or should I just proceed as ...
- 50.5k
15
votes
Accepted
Gnucash Mutual fund changes number I enter
This is the problem:
Security/currency: USD (US Dollar)
You have told GnuCash that the account holds quantities of USD, and thus it expects that the “price” is exactly 1 since you are “buying” USD ...
- 879
14
votes
What should I do with the stock I own if I anticipate there will be a recession?
Remember the golden rule: Buy low, sell high.
The reason everyone is afraid to give you the obvious advice is that they're afraid you won't do that. And on average, they're right as rain.
What ...
14
votes
Role of fees in mutual funds: Is it exaggerated?
The problem you have is picking the fund that can overcome the higher fees to beat the low cost index fund. You have to know which funds will over the next 10 years beat the index by enough to ...
- 133k
13
votes
Should I care about expense ratios?
YES.. Management fees cut directly into your profits. A fund which achieves 8% growth but costs 1% to maintain delivers only 7% to you. Compounded over years, even a relatively small difference can ...
- 41.5k
13
votes
Is 401k as good as it sounds given the way it is taxed?
Before anything, I see that no one mentioned the one thing about 401(k) accounts that's just shy of magic - The matching deposit. In 2015, 42% of companies offered a dollar for dollar match on ...
13
votes
Accepted
How to automatically reinvest in non-dividend paying funds
I think you are overcomplicating things.
In the case of a stock / fund which pays no dividends / interest, your investment automatically 'reinvests' any growth directly into the value of a stock.
...
- 41.5k
13
votes
Should we really be looking at the expense ratio while choosing funds?
Past performance accounts for the expense ratio, but is (proverbially) not indicative of future results. In particular, going by past performance and choosing a fund that has recently beaten the ...
- 29.4k
13
votes
For mutual funds, can you pay capital gains taxes even if you sustain a loss (as this article implies?)
Yes, it is possible to pay capital gains tax while holding a mutual fund that has gone down in value.
Mutual funds have something called “capital gain distributions.” Inside a mutual fund, when a ...
- 115k
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