Kernels of Korn

  You can become an extremely competent mutual fund investor!

I guarantee it and next month we’ll start in that direction.

HEY! IT’S NEXT MONTH ALREADY!

So! Lets start down the road to becoming a competent mutual fund investor.  This “journey” will take us a few months or even a year or two but come on! Lets take the trip! It’ll be fun, educational and most likely profitable!

Just as a trip to Atlanta may take different routes this journey we are starting may also take different routes. For now, we’ll go on the road to Mutual Funds by just jumping in the market and taking off!

By this I mean, I want us to each just invest in just about any ole Mutual Fund! Yeah, take a dart and toss it at the paper where it lands, buy that Fund! Okay, okay we won’t really be that much of a “guesser” but lets do this:

•  Eliminate our fears of investing in the stock market.
   

• Do some really basic research.
   

•  Buy a Mutual Fund that SEEMS to be a good solid long range investment.
   

• Setup a monthly checking or saving account withdrawal for regular purchases of this same Mutual Fund.

What I’m after all of us to do is

Get Started!

I have found time after time that the biggest deterrent to learning how to be an investor is:

NEVER STARTING!

Fear of failure? Fear of looking foolish? Fear of losing a few bucks? A past investment gone bad?

Whatever the reason, forget your yesterdays, your mistakes, your past investments and let’s start over. We are taking a new road! A high road toward investing that should keep you chugging along. Can we lose some money? Sure! Particularly in the short run. However, based on the history of our stock market and the history of the funds we may choose short run losses will most likely be overcome by long run profits.

Start! Toss a dart? Pick a fund that someone else owns? How, do you start?  

• Determine your risk tolerance.
   

• Research funds that match your risk tolerance.
   

• Determine your investing goal.
   

• Determine how much you can invest.

Risk tolerance? Can you sleep at night after  you’ve made this investment? If the market has a short term drop will you get all upset? Well, let’s all start with an amount that you can safely say that it won’t matter if you lose it all! An amount that may well be some money that you look upon as extra, as nice to have but if you do lose it you could still sleep well! What is your risk tolerance, in terms of dollars? In terms of investing? 

You determine the dollars and the risk levels and this will help you decide which Mutual Funds you can buy and how much you can spend!

Now, I’m going to assume that: 

• We all have a moderate risk level.
   

• We all are investing for a goal that is 5 years down the road: College? Retirement? A new House?
   

• We all have at least $500 to start our investment program.
   

• We call can afford at least $50 a month for our automatic investment program.

Now we must start the research! Don’t get scared here! You can do the initial research and call or e-mail if you have questions.

Research? How?  Well, are you a magazine reader? An internet user?

Magazines are perhaps the easiest way to at least start your research. Every newsstand has at least 5 magazines that most likely will, each month almost, have an article about rating the Mutual Funds for the past year or more. Money Magazine, Mutual Funds, Kiplinger’s Personal Finance, Forbes etc. are just a few. You can also contact the Charles Schwab office in your area and ask for a copy of their Mutual Fund magazine and select list.

When you get these articles in hand, start to list the funds that sound interesting to you.

Here’s how I do it. Here's a list of parameters that I use when selecting a new fund:

•  I don=t get too excited about a 1 or 2 year return.
   

• I buy based on at least a 5 year return  over 10%.
   

• I never buy what's listed as being the best or hottest fund.
   

• I actually like to compare 3, 5 and 10 year returns.
   

• I don=t buy any funds that charge an up-front commission, usually called a Load Fund.
   

• I buy only NO-LOAD funds.
   

• I watch the funds expenses--administration and sales fees or fees known as 12B fees. I prefer that administration is less than 3/4 of one percent. Or .075%. 12 b funds can be really tricky so read what the magazine experts say.
   

• If all other factors are the relatively the same, I buy the fund with the smallest total invested dollars. I think smaller funds can continue to manage and make historical returns better than bigger funds.
   

• I buy funds that are typically fairly aggressive. That is to say, I am not into being conservative. This attitude will changes as my age increases. This may not be “your” strategy, so we will also look at more conservative funds.

Get your list ready and next month we dive into how to eliminate some of the risk factors! Well, maybe eliminate is too much, let’s just say we’ll reduce some of the risks!

 

Have any questions? Need some specific help, send me an E-Mails so that I can develop some columns that are suited to the needs of you and  your mutual church members! No question is dumb unless it remains unasked!

Rick Kornmeier

 

CMM@BIBLICALSTEWARDSHIP.COM

Please note: Mr. Rick Kornmeier CPA CFP does not sell any financial or accounting services, books or tapes. His involvement with Consumer and Biblical Stewardship is a ministry that was started in the early 1980's strictly as a means of sharing his abilities with churches and Christians in need of his expertise.