Good Investment Management For Average People

You can pay a penny on the dollar for good investment management or pay lots more for asset management like some rich folks do. Does the latter guarantee good investment returns? No way. Whether they call themselves investment management companies or asset management firms, you lay your money down and you take your chances. Why pay more?

Investment management or asset management takes various forms for the individual investor. Hedge funds might charge 2% yearly plus 20% of profits, and are out of bounds for the average investor. You can’t legally invest there unless you are rich by normal standards. That’s fine with me because I’m not interested in paying big bucks for investment management that offers no guarantees. The good news is that there are some very good investment companies out there that work cheap in my opinion. If you are like most people and lack the experience and skills necessary to manage an investment portfolio, listen up.

Good investment skills take years to develop and few people ever develop them without losing considerable money during the learning process. Skip the aggravation and put the professionals to work for you on a budget. Mutual funds are the investment management alternative of choice for 10s of millions of Americans. Why? That’s what they are design to do… manage money for individual investors who are not necessarily rich or financially sophisticated. Now, let’s talk about good investment management for pennies on the dollar.

Not all mutual funds, especially stock funds, are create equal when it comes down to the cost of investing. A $10,000 investment in the wrong fund could cost you $500 off the top in sales charges plus yearly expenses of $200 a year, increasing with the value of your investment. On the other hand, a similar fund with a more favorable cost structure is likely available with no sales charges and yearly expenses of less than ½%, total cost of investing. The only predictable investment performance difference between the two is the cost of investing. Every penny you pay in sales charges and fund expenses comes right out of your pocket. And acts to reduce your net profit or investment return.

The very lowest cost of investing can found in NO-LOAD INDEX FUNDS. There are no loads (sales charges) here and low yearly expenses, because the investment management team simply invests in the basket of securities that are included in an index. For example, if you want to own a small part of a large portfolio of major stocks, an S&P 500 INDEX fund will have you invested in the 500 most valuable U.S. stocks for less than a penny on the dollar, less than ¼% a year if you pick the right one. The two largest fund companies in the country, Vanguard and Fidelity, offer no-load funds. One of them offers a nice variety of index funds at very low cost to investors.

I’ve followed mutual fund companies since the early 1970s; and watched as the really good investment management companies among them grew to be some of the very largest. In my opinion they reached the top by offering good performance, good service, and a low cost of investing.

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