Everything costs money whether you like it or not. As they say, “there’s no free lunch”. Even that ‘free’ toothbrush you got at the dentist cost someone money. When it comes to investing, even though you are making money, it is not free. You pay commissions when you buy stocks and you have to put in the time to research and purchase it. It costs your time and some money.
One of the easiest types of investments are mutual funds. With a mutual fund several to hundreds of people pool their money together. A fund manager uses this money to buy lots of different stocks and/or bonds. With some mutual funds, you have to pay a commission, usually as a percentage. For example, if you earned 9% this year and they charge a 2% commission, you will only earn 7%. On the other hand, you could invest in no-load funds and pay no commissions.
There are many obvious and not so obvious advantages to no-load funds. When you don’t pay a commission, you save money. Also, the money you save is purchasing you more investment which also earns you more money.
With investing, you put your money to work for you. If you invest more, your more will earn more. With no-load funds, you get to put all the money you invest to work.
As I mentioned, another way that investments cost you is through time and effort. If you are buying stocks and bonds, you have to research the company you are buying shares of stock from. If you just invest in a company that you blindly pick from the newspaper, you are greatly increasing the risk of your investment.
Also, when you invest yourself, you need to spend time and have the knowledge to know how to effectively diversify your stocks. This is time you could be spending with family and friends, spend helping others, or doing whatever you want. Our time is very valuable.
Mutual funds save a lot of time. You don’t have to research, aside from choosing the initial fund, and you don’t have to know how to research. With a mutual fund, the fund manager, who is likely an expert, does all this for you. You save hours and hours of your time. You make the initial choice of a mutual fund and let the manager do the rest.
You can choose a loaded fund, but you’ll pay for it. Even if it does earn more than a no-load fund, the earnings will probably even out in the end. Plus, you can never be guaranteed a rate of return. Invest in a mutual fund for the easiest, most diversified portfolio, instantly.
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