Investing in mutual funds is easy activity, but most investors still do it the wrong way. Have you heard the phrase “Mutual funds simply don’t work!”?
If you be expecting that just throwing few thousands into the best drama fund in your country will make you victorious, then I am not surprised it doesn’t work. If you are willing to think and do some effort developing an investment plan, then I am sure you will break the market and earn double digit from mutual funds investing. Constantly, year after year.
Here are five simple tips which will help you do that:
1. Diversify within the markets and fund types
This is actually simple. If you invest in 3 mutual funds, don’t pick all the 3 within the same market. Better join mutual funds which invest in different market niches, or different regions of the world. Don’t put all your eggs in one basket.
Another thing to consider is mixing the types of the funds. Pick one general funds with moderate risk level. Pick one index fund. One more conformist mutual fund. One which invests only in startup companies… You got the idea. Mix those funds.
2. Buy at low times
Most people buy when the mutual fund prices have been rising up for long time. They sell with panic when the market goes way down. Most people lose or don’t perform well with mutual funds or any other investments.
Low times are good times to increase the size of your investment. You get shares at lower price and the prices are much more likely to rise than if you bought at high times. Of course there are tons of other factors to believe, but in general, low market is better for buying more shares.
3. Use signals
There are various services online that offer buy and sell signals for mutual funds. They will tell you when to sell or buy a known mutual fund and will help you to achieve much better results than with “buy and hold” strategy.
There are few disadvantages of these services - they cost money and not always perform so well. But with some research you can pick a winner. If your portfolio size is big enough - at least $10,000 - the monthly or yearly fees will probably be justified by the improved results of your investing.
4. Look outside your country
If you love your country, that’s great, but hope you know its economy can’t always grow with the highest rate in the world (even if it is doing that now). The good investor have to to look at different world regions designed for good mutual funds.
Right now Asia (India, China), East Europe (Bulgaria, Ukraine, Romania), Latin America are hot. It would be nice to pick mutual funds that play some of those markets. And a small hint - don’t go with the main international players like Pioneer - they are too conservative. You’d better invest in local funds in the nation you target - provided they believe foreigners of course.
5. Be consistent
Mutual funds investing are not a get rich quick game. Putting few bucks once will not make you rich. Consistency will. Invest part of your profits each and every month. Even $50 makes wonder when done regularly, month after month, and year after year.
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