The Mutual Fund Exchange

[99Dan]

Tim,

Regarding your mutual fund picks here are some things you might want to consider before buying.

Are they “no-load” funds? Personally I would no longer buy load funds as there are many good no-load funds available so why pay 4 to 6% up front fees?

What are the annual fund expenses? Look for funds with annual fees around 1% or lower.

Have you checked out the minimum required investment in each fund? Some funds require minimums as low as $1000 but others may require as much as $25,000.

Have you considered that mutual funds generally pay out Capital Gains and dividends each year that will be taxable for that year even if you re-invest the gains?


I hold some mutual funds that I bought several years ago that have done well such as:
DODGX
MVALX
FCNTX
FDIVX
VGHCX

However, I no longer plan to buy regular mutual funds. Instead I buy the ETF’s (Exchange Traded Funds) which are becoming very popular. They are also referred to as iShares. ETF’s trade just like stocks but are actually a mutual fund. There are many different ones to choose from. They do not pay out taxable capital gains each year. They may pay some taxable dividends. You therefore defer paying any capital gains until you decide to sell which may be several years later.

Here are some sites you could read about ETF’s and I’m sure there are lots more good sites out there.

http://www.ishares.com
http://finance.yahoo.com/etf/browser/mkt?ce=148
http://www.etfconnect.com

Here are a few ETF’s that I own:
DIA
EFA
SPY
IWS
IWN
EEM
I also own a number of individual stocks so overall I am well diversified.

Looking at your list I actually like the percentages you have chosen for each category. My distribution is fairly similar to that but I currently don’t own anything in gold. I wish I did but I think it is a bit late in the game for gold so I probably won’t be buying any.

I would be careful about buying all those funds this week. Maybe you should consider getting in to them slowly over a longer period of time. Maybe buy one fund (or ETF) every couple of weeks until we see how this market is going to react.

Best of luck with your decisions.

Dan