Morningstar's Guide to Mutual Funds: 5-Star Strategies for Success

By Christine Benz, Peter Di Teresa, Russel Kinnel
286 pages
Publisher: John Wiley & Sons; 1 edition
ISBN-10: 0471269662
ISBN-13: 978-0471269663

Introduction

Obviously, it's a fact that millions of Americans currently own and will continue to purchase mutual funds. Today many are realizing they didn't monitor, change, or properly allocate some of their funds. Obviously, many will depend on them in the future. 401Ks are also mutual funds, as well as the traditional and Roth IRA, the 403b among others. Since so many are participating and people will continue to pour billions of dollars into them, the beginning individual mutual fund holder should have this book.

It will primarily benefit those who are new to mutual funds or those who want to increase their general knowledge. Simple, precise explanations. Explanations on proper and true diversification, rates and risk of return, asset allocation, and appropriate risk based upon one's attitude, age, and stomach. It tells one how to look at how a particular fund operates and what it's invested in. Terms such as diversification, dollar-cost averaging, and the fact that past performance is no guarantee of future results are usually known to those who've followed mutual funds already. It is good to understand and calculate the true "cost" of a fund. Declining backend loaded funds are o.k. in solid performing funds that an individual will hold for a period of 5 yeas or more. But does one know if they are gong to be in a fund for five years? When a new fun manager takes over the operations and asset allocation of a fund, it is important to note how and where there may be changes. Know the difference between a micro, small, medium, and large cap index fund. How is a cap defined? Know the difference between a balance, value, international, emerging market, index, and global fund. Global fund? That means most of the investment allocation is overseas right? Nope. Often, most of the fund's holdings are in domestic (American) companies which means the global fund may have the same holdings as your U.S. blue chip, or more domestically oriented funds. Owning more mutual funds, and even funds in different families, means the more diversification correct? No. One can achieve the same diversification with 7 funds as 17. Even moreso. In addition to this book check out Bob Brinker on the radio.

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