Learn to Earn - Peter Lynch
- Mutual Funds were invented for people who want to be invested but can't be bothered about details on fundamentals.
- Your only job is to send the money, which gives you a certain number of shares or units in the fund. Whether you invest $50 or $ 550 million, you still own a piece of all the stocks in the fund.
This is less risky than owning only one stock, if you are a novice investor.This is less risky than owning only one stock, if you are a novice investor.
- As an added attraction, many funds pay cash bonuses in the form of a dividend.
- Along with the chance to share in the gains from a fund, you’re also paying a share of the management fees in the fund expenses.
- Professional stock pickers have the knack for picking the right stocks but unlike professional doctors or sport players, stock picking doesn't require exceptional skill and an amateur has a decent chance of beating a professional stock picker.
- In particular, professionals overlook the newer, inexperienced companies that often turn out to be star performers in business and biggest winners in the stock market.
What are the important points to be considered when investing in a Mutual Fund?
- Buy Mutual Funds directly from companies that manage them.
- When buying through a broker, always know his commission and whether a better product can be available at a lesser rate.
- For Long term investment, go for pure stock funds instead of debt and hybrid funds.
- Look at Past performance of the fund and make sure that the manager who compiled the great record is still there.
- It's more profitable to invest in small companies and large companies. The funds that invest in small companies beat out the large cap funds by a self-sufficient margin.
- Don’t take a chance on a rookie (newly recruited manager) fund when you can go for a veteran fund.(old manager)
- It doesn't pay to be a fund jumper.
- Go for a no-load fund which doesn't charge an entry fee.
What is an Index fund? It is a kind that is guaranteed to match the average; it doesn't need a manager, it runs on autopilot automatic mode. It simply buys all of the stocks in a particular index and holds onto them.Find out the index fund as per your requirements.
Picking your own stocks
- Picking stocks involves a lot of hard work than investing in a mutual fund, but there is great deal of satisfaction in choosing your own stock.
- If you own 10 stocks and three of them are big winners, they will more than make up for the one or two losses and the six or seven that have done just OK.
- You can always have a stimulating experience and do a trial run by purchasing a few stocks. Playing the stock market game can be fun as well as educational as long as the players are taught the basics of investing and don't take the results too seriously.