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young dreamer beginning to invest in funds
Old 05-10-2006, 12:30 PM   #1
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young dreamer beginning to invest in funds

Hi everyone,

I've been contributing to my Roth IRA for a couple years now, but only recently have decided to look into mutual funds (before I let my father play around with stocks. Not the best idea, but at least I didn't lose any money).
I'm thinking about investing 2500$ in the following: RYVPX, TEQUX, and UMBIX. They're all top-rated by Morningstar, but I don't know what other characteristics I should be taking into account.

Any suggestions or recommendations?

Thanks!
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Re: young dreamer beginning to invest in funds
Old 05-12-2006, 10:31 AM   #2
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Re: young dreamer beginning to invest in funds

Hi,

There are lots of things to look at:

1) Asset allocation. A basic allocation would have you invested in large caps, small/mid caps, international funds, etc. I am assuming that you are relatively young and OK with fluctuations in the market, and that you have a long time horizon (greater than 20 years).

These funds all pretty much seem to do the same thing - look for undervalued companies of any size (Royce is small/mid, but the others are broad). They are too alike.

Assuming your Roth is your only investment vehicle right now, you should think about a low cost, broad market index fund as a start. Vanguard Total Stock Market Index, for example. Then you can add a similar small cap index and and international fund, maybe a REIT. Add/expand this list as you put in more money. Or you could buy a large cap growth and large cap value fund to get you started, just as another option. The idea is to diversify across a variety of asset classes.

2) Cost - over time, expenses eat a huge part of your profits.

These funds have expense ratios of 1.17%, 1.29%, and 1.07%. Vanguard funds have expense ratios around 0.15% to 0.2%. This makes a BIG difference over one's lifetime.

3) Index vs. managed

Index funds are cheap (especially at Vanguard or Fidelity), and most managed funds don't beat their indices consistently - two reasons many people hear will sing their praises over and over again (I'm one of them).

Having said that, I do own some managed funds, ones that do have a pretty good track record of beating their indices. They make up about 30% of my portfolio. But if you are just starting out, I'd build a core base in index funds and they worry about managed funds later.

Hope this helps. And of course, these are just MHO, worth what you paid for it!

Karen
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Re: young dreamer beginning to invest in funds
Old 05-12-2006, 10:31 PM   #3
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Re: young dreamer beginning to invest in funds

I would second karen's advice. Read a book like "The Four Pillars of Investing" or something. Not the usual "here's how to beat the market', "get rich quick" crap.

-CC
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Re: young dreamer beginning to invest in funds
Old 05-13-2006, 09:19 AM   #4
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Re: young dreamer beginning to invest in funds

Explore www.fundalarm.com

Commentary with an edge, great ranking of funds by type, top quality discussion board (lots of links, monitored).
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Re: young dreamer beginning to invest in funds
Old 05-13-2006, 12:14 PM   #5
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Re: young dreamer beginning to invest in funds

Quote:
Originally Posted by Brat
Explore www.fundalarm.com
Commentary with an edge, great ranking of funds by type, top quality discussion board (lots of links, monitored).
Most excellent board-- next best after this one.
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Re: young dreamer beginning to invest in funds
Old 05-18-2006, 08:45 PM   #6
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Re: young dreamer beginning to invest in funds

As the others have said, read all you can on investing. This was my logic with the Roth IRA account. When I started contributing to a Roth IRA in 2001 I picked Vanguard STAR fund. It was a a managed (not indexed) fund of funds with low fees and a low expense ratio. My logic was becase it is treated as a seperate account it would take some time to build the necessary assets in a Roth to avoid yearly fees and such so 1 fund was less expensive. The STAR fund was also diversified in a similar manner to my other investment accounts which made it easy to blend with the index funds of my 401K and taxable accounts, and finally the price and performace was right. This choice was right for me not only becase of performance but becase of my other assets. Maybe this is not what is right for you but dont just pick a fund becase of its recent performance and 5 star rating.

Elroy
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Re: young dreamer beginning to invest in funds
Old 05-28-2006, 04:55 PM   #7
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Re: young dreamer beginning to invest in funds

Quote:
I'm thinking about investing 2500$ in the following: RYVPX, TEQUX, and UMBIX. They're all top-rated by Morningstar, but I don't know what other characteristics I should be taking into account.
A little advice for no cost: Never invest in anything that YOU do not know why you are investing in it. Who cares if M* gives if 5 stars or 10 stars? Does it meet your asset allocation? If you do not know if it meets your requirements, stay away until you are willing to research and read about the investment and decide if it works for the most important investor that you know.
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