Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP Path: utzoo!linus!decvax!cca!charlie From: charlie@cca.UUCP (Charlie Kaufman) Newsgroups: net.invest Subject: Re: Questions on mutual funds Message-ID: <5168@cca.UUCP> Date: Tue, 19-Jul-83 10:58:55 EDT Article-I.D.: cca.5168 Posted: Tue Jul 19 10:58:55 1983 Date-Received: Tue, 19-Jul-83 19:28:15 EDT Lines: 60 Replying to: I just got an advertisement from "The No-Load Fund Investor", a quarterly mutual funds investment advice service. I have no experience with stocks - I'm timid but interested. I haven't much to invest and would rather not lose it (which, of course, makes me unique). So I come to the experts in this corner of the net. Are these guys for real? They sound too get rich quick slick. It sounds like the sort of thing I expect to find in matchbooks and in the back of "Psychology Today" [ :-) ]. First, mutual funds are legitimate investments. Current prices are listed in most newspapers that list stock prices. The stock market has done exceptionally well in the last year and mutual funds have shared in that growth. The profit figures in the NO-Load Investor are undoubtedly correct, since they are easy to compute. The catch is that past performance is a poor predictor of what the funds will do in the future. It is not obvious whether professional fund managers do better than throwing darts at the stock pages. The funds with the best record for the last year are probably the most speculative. They will probably go down the most if the market turns around. In my opinion, there is no reason to choose a fund based on its past performance (but mine is a minority view). But, if you have to choose one and have no other basis, it probably won't hurt either. Mutual funds are inherently risky. You should not put money in them you can't afford to lose. (Money Market Funds are an exception, but they offer no potential for profit either). On the other hand, you could conceivably double your money in a year or two. It has been said that the only difference between Las Vegas and Wall Street is that on Wall Street your losses are tax deductable. Are you a gambler? If you're still interested, mutual funds offer some advantages over picking stocks yourself. The biggest is that the minimum ante is smaller. You can probably get into a mutual fund for $500 (maybe less if you shop around). In theory, you can get into stocks cheaper than that, but the commissions will kill you. I wouldn't recommend stocks unless you have at least $2000 to play with. With less than $10000, stocks will be much riskier because you will not have adequate diversification. There are two kinds of mutual funds: Load and No-Load. The difference is that load funds are sold by agents, who will answer your questions, help you decide what to buy, and help you feel comfortable with what you're doing. For this, he gets a 4-8% commission on the sale. On No-Loads, you're on your own. It's like a gas station with full and self service. If you're willing to do a little extra work, you can save a few bucks. I believe everyone should have a little money in the stock market in some form. It makes reading the newspaper much more interesting. Good Luck. --Charlie Kaufman charlie@cca ...decvax!cca!charlie