stocks investment, invest your money in an mutual fund
Whether you were able to buy the shares independently? We have in mind not the physical ability to come to the phone and press a few buttons. We even do not have in mind the ability to analyze and select the deserving candidates for the purchase. We have in mind the psychological load, which will be followed by the purchase of the shares. More than 50% of the initial shares, bought yourself will fall in price. Yes, and the second, and the third shares may behave no better. Then, if you choose the good of the company, the shares may grow up and give you the profit. But how you will react to a loss? And that is offensive, the blame will be nobody - you have received the decision. Will you be able to sleep peacefully, having lost for a day 100, 200 or 1000 dollars? The loss in the casino is quickly and just as quickly forgotten (if, of course, is not lost all state). Shares may fall in the price slowly, drop by drop drinking in your blood. Worst of all sit at the computer and monitor, as minute after minute melt your money. Then you will learn how to intelligently cut their losses, but it is very doubtful that you dare to try his luck, not paying attention to the growing losses. At some point, you will, most likely, will not stand and sell shares with the loss of, say, 30%, and on the following day, the damned shares will certainly grow in the price.
It may be better to give their money to professionals who can constantly be carefully analyze the market, buy and sell stocks without any particular emotion (because it's not their money) and have a lot of other advantages before an Amateur?
There are such opportunities. In the USA you can invest your money in a mutual fund. You have to periodically will deduct a certain percentage for the maintenance of accounts in the Fund and once a month to send the report on the done work, informing, as far as rose or fell your invested capital. There are thousands of funds that differ in the degree of risk of the investment portfolio. If you do not like risk, then give the money to the Fund, specializing in the market of short-term bonds (money market fund). You will sleep very quietly, receiving annual profit, which barely cover the growth of inflation. Don't like? Then you can put money into the Fund of steady income (income fund). Such funds are buying long-term bonds (bonds) and a little bit of shares with high dividend, which is slightly increase your profit. If this is not enough, you can select the Fund that focuses on growth capital (growth fund). These funds buy shares stable companies, in which the expected growth of prices. And, finally, daring, you can invest in an aggressive Fund, which bought shares of rapidly growing companies, and to rely on the most profit (aggressive fund). But with this investment and the risk also increases sharply: these growing companies do not always justify the hopes, and the price of their stock at any time can fall sharply.
What are the advantages of mutual fund than an independent game with the stock exchange?
1. You don't have to become a specialist in market shares, that really is equivalent to acquire the second profession.
2. You save time. You don't need to learn the behavior of the market and the state of the economy, to conduct a thorough analysis, to monitor the yen purchased shares. This time you can spend on the development of own business or leisure.
3. You save money by refusing to buy a computer, financial Newspapers and from subscriptions to various computer services. You don't have to pay for the software, books on investment, calls on the phone.
4. You are more calm, so what do you think that your money is in reliable hands of professionals. You have somebody to blame in case of failure.
5. You save on brokerage commissions, as large investment funds buy shares of almost without fee.
6. You have a great diversification of the funds allocate capital among dozens of shares, which dramatically reduces the risk of large losses. Many funds buy stocks of companies from different countries, which again increases the diversification.
These six points make the investment funds in the us immensely popular. We have already said that the average American family invests in the shares of about 30% of the capital and it does so mainly with the help of funds. Advertisements of investment and pension funds filled all Newspapers, magazines and TV programs. Standard advertising is as follows: an old woman comes out of the magnificent home, sits in a fancy car, riding on a picturesque Mirabello places and recalls, as in her youth she decided to start to invest money in the Fund. And here is the result!
In America respected professionals. One of the most popular advertising, which is suitable for almost all occasions, depicts a man who thought himself to have a surgical operation. Americans laugh and not to be like this hero, invest money in investment funds.
Resist the promising signs difficult, but if you will have the opportunity, go to any office on the planning personal Finance or in the building of the investment Fund. Will meet you there in as a son. How old are you? And your wife? Do you have children? What a nightmare! Because they have so much to learn! And how's your health? Oh, you still smoke?! And what are you going to do in retirement? You like to travel? You want to buy a small house on a lake? And maybe better in Florida? You need to think about growth of unemployment - in fact on the account in the Bank you have almost empty. The horror! But we will help you! What a happiness that you have come so at the time! Delay can no longer be any minute!
After such psychological treatment begins the second part of the presentation. You inundated terms, of which you don't know the half of it. In any case it can be shown that there is something you see in the share of index options, bonds AAA, tax umbrellas, mean-square of the standard deviation, etc.- it might hurt the clerk, and the procedure only be lengthened. They will show you the beautiful graphics, opened on the computer amounts of money, which you will have, by transferring their savings in the management of the Fund. You íàïîÿò coffee, will give a lot of waste paper and report that they do not want to exert any pressure, but the money is better to bring tomorrow.
And then it's time to talk about the disadvantages of the investment of money in a mutual fund - a few of them, and give them to the list.
1. You deprive yourself of the pleasure to take part in the most exciting in the world of the game - the game at a stock exchange.
2. Your income on the average will be insulting to the small compared to the opportunities offered by the stock market.
The last point is very important and requires decoding. We have already said that the stock market may, on average, to give about 13% of annual profits. What's the average for the funds where there are professionals of the highest qualification, graduates from institutions like Harvard and Wharton, with access to any sources of information? Professionals working in the luxury high-rises, and receiving a salary, worth many hundreds of thousands of dollars a year? If you understand, what kind of money are built these skyscrapers, you would not be difficult to guess, what the profit provide funds to its investors?
More than 75% (seventy-five percent!) investment funds in the USA gives its clients the average income lower than the growth rate of the stock market. Of the remaining 25% only a small part of the funds gives the profit of a few percent more of the market. Many funds lose money of their clients, even with the growing market. On average, investment funds provide income to 2% per year less than the market as a whole. Whether you were able to choose the right Fund for investment or properties? Stock selection is more common, than the choice of the Fund. Advertising each Fund contains the line, printed in very small letters: past performance is not a guarantee of future. And this is the most important thing that you need to read in such advertisements. Do not overload the text of the numerous examples, let's say in General that often, funds, occupying first place in the course of several years, was suddenly pulled back, and the young, little-known Fund suddenly comes up in the first place and teases the inhabitants of 38% of annual profits. Unfortunately, this is usually only by the occasional success.
What's the matter? Why funds yield lower returns than the market on average? The first reason is the overhead costs, which account for about 1.5% per year. The second reason is incomplete investment, as all funds are constantly maintain a certain level of available capital (about 15% of the capital invested into the shares). The third reason is the frequent buying and selling of shares. The average Fund of the United States each year, updates of more than 70 % of their investment portfolio and, although funds pay a small fee, nevertheless, the Commission and the difference between the purchase and the selling price of shares reduces the profit. We have already noted that the sale of a large number of shares is not possible at the maximum price, and the funds are beginning to buy more with the growth of prices of shares, which also reduces the possible profit. And the last reason is the frequent lack of professionalism or simple negligence of funds, while market shares requires constant attention and analysis.
What to do if you do not want to play on a stock exchange independently, do not intend to trust investment Fund, but when it decided to invest their money in stocks? The decision for such a case is the so-called index funds (index funds), which bought the shares on the main market indices. Next we are going to describe these indexes, but now, just note that one of the main index of the S&P 500, whose value is determined by the average price of the shares of all of the included 500 leading us companies. There are funds, which buy shares of all companies from the index, which reduces the risk of the investment and, removing the need to analyze the market, significantly reduces the overhead costs. Having invested money in the Fund, you will be sure that your capital will grow as well, as the us stock market.
But there is also a more simple solution. On the American stock exchange ÀÌÅÕ sold securities Finance trust SPRD, which also owns the shares of all companies in the S&P 500. In these securities dividends shall be paid in accordance with the average dividends of companies from the S&P 500 (net of about 0.5 % for overhead costs) and their price is the same as the index. The trading symbol of these securities - SPY, they are bought and sold with the same ease as shares, and does not require opening of an additional account in the investment Fund.
If you still decide that six of the advantages of investment funds outweigh two of their lack, that in this place you can stop reading our books and buy a Handbook on investment funds. If you have access to the Internet, you can explore the funds, making the search for the keyword «mutual fund». The whole story will be addressed only to those readers, who are interested in the stock market and want to learn how to competently operate on the stock exchange is at your own risk. And the larger the risk associated with a greater profit.
