Home Forums Hunting & Shooting Hunter's Campfire Help with Mutual Funds and ETF

Been having a very good year economically and want to invest most of
the money. One broker is telling me to put the money in a no-load
mutual fund. Another broker is talking up Exchange Traded Funds.
I do not understand ETFs at all.

Looking for help with investment choices.

So far in September, I have been getting all manner of terrible financial
advice on ETFs. A lot of financial advisors seem to think high risk bets
are the only way to go.

Think of an ETF as a mutual fund that trades like a stock. There are hundreds of them and they can be as conservative or aggressive as you like.

I just spent the morning talking friends about investment strategies & the 5 I talked with agree with me "Good time to be in cash". If you want to be in mutual fund go with a Vanguard index fund

I now think that good investing is very conservative and long term. May sound boring but its emotionally appealing to me.

Diversification, dollar cost averaging, and an eye for your time horizon....yes. Long term investing doesn't work very well if you already have one foot in the grave.

E.T.F. stands for exchange traded fund. A portfolio of something that trades like a stock on the exchange. There are also closed end mutual funds, that trade on the exchange like a stock. There are many many various types of both, from fairly calm to heavily leveraged, broad based to on the other hand narrow based.
If you are NOT familar with these, get familar, plenty of stuff on the net explaining them before investing.

Equal dollar purchases at specific time intervals.

An example of this is a persons 401k contributions that are deducted from each paycheck.

It helps in lower your average cost in a sideways market, like what we are experiencing now, post correction. When the market is down you buy more shares at a lower price, when it's up, you buy fewer at the higher price.

http://jasonkelly.com/resources/strategies/

Check out this 3% Signal strategy that uses a single small cap ETF (IJR) and a bond fund. His book is fascinating and makes alot of sense to me.

If you have the ballz you can now use ETF's to short that market if you think the current trend will continue for any period of time.

Having said that, I am a long term invester (not trader). I have thought about shorting some via ETF but then remember that timing any market is in my opinion a fool's errand.

My $.02

twofish

This. Wellington has been fairly decent.

Been dealing with investment issues/strategies for many years but never had the help of a broker or "advisor" - except possible insights gained in casual conversation. So, no market expertise/advice here. The only thing I can offer is take a clear look at your current circumstances and your own likely future. That is probably a more predictable guide than guessing what the market, and the various market options, will do.

For a long time, my days (and often evenings) were taken up with job responsibilities and we were raising four kids - eventually seeing them through university studies. Dollars available for investment were very limited and I simply did not have time to study the market or be in contact with a broker. So, tried to go with the best managed mutual funds looking toward the longer term and, with the retirement plan, took advantage of income shelters where circumstances enabled such.

As the girls went on to careers we had some discretionary $$, so put some into local low-risk real estate development schemes and some into higher risk private ventures - tried to stay balanced - but never got into the "market" as such. Worked out OK.

Later, as age and eventual retirement became factors, my very stable and low operating cost supplementary retirement vehicle began to offer personal annuities that were were being managed much like the highly successful retirement aspect. So, I plunked much of the yields from earlier ventures into those annuities. Selected a mix of lower yield/lower risk stuff and some medium risk things that seemed to have good growth potential. This worked OK.

Later, it looked like the retirement income would be sufficient and our main interest became where to live in our dotage and how to grow something to leave to the kids. So, we bought a chunk of real estate to live on and I shifted most of the remaining annuity and retirement funds to stock-indexed accounts. With the exception of that sudden market drop a few years ago with eventual recovery, that worked OK. Given any good fortune, the kids will make a buck when this place is sold and we will not have needed to dip into the annuity aspects.

Sorry if this has seemed like a personal ramble, but saw your inquiry and it triggered recall never before assembled into a picture. There are different ways to skin a cat. There was no long-term plan and, of course, nothing was guaranteed. We simply read the circumstances and flew by the seats of our pants. Who knows? It might have gone better with a good broker/advisor using the market venues.

I always looked at it this way:

1. I find a company (investment) I like. No emotion. The fundamentals are sound, leadership is good - everything tells me this company, over the long haul, is going to provide a good return on my investment.

2. I buy 10 shares for 200 dollars. My cost per share is 20.

3. Something happens, a run on the markets/industry that doesn't necessarily have anything to do with my company (investment) directly. Share price falls to 10 dollars per share. People get spooked - they see they just lost 1/2 their money and forget WHY they made their choice. Lots cut bait and bail.

4. At this point you buy another 20 shares for 200 dollars. You now have 30 shares at an AVERAGE cost of 13.34 per share. All that now needs to happen is for your share price to rise above that average cost and you're ahead. It has to break 13.34 $/share instead of 20 $/share. You've dollar cost averaged your investment down.

So long as WHY you invested in the company hasn't changed dramatically (management change, massive changes to the world situation etc) - the company/investment still makes sense and happened to be hit by general volatility in the market- buy into the dip. Don't be emotionally invested, pay attention to how the COMPANY is doing, not the market and you should be okay.

Now I'm sure more sophisticated people here will tell me I'm way wrong but it's just how I see things - looking in from the outside.

"Know what you own, and know why you own it." - Peter Lynch

You are not wrong.

A short term trader should not average down. If the market tells them they are wrong, they need to get out and look for another trade.

As an investor, you philosophy is generally sound. Keep in mind it is necessary to examine both the micro and macro factors affecting your stock, either could make it necessary to rethink your investment thesis.

High risk is ok if you are young and have time to recoup before retirement. As you get older you want to shift some your investment to lower risk investments like bonds.

Just got this email from Jason with a pretty good offer . . .

Final week before rebalance

I've written to you about this before, so I'll keep it short.

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Jason Kelly & Co.
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No load Index funds I like Vanguard lo fees and taxes. Over time you will thank me.

I could lower my dollars cost ave. very easy today, but I am scared to invest right now. My biotech fund most likely won't recover for several years. I can lower my ave cost but every time I invest it goes down even more. Soon I will be out of money to invest. I'm glad I only put half of what I had in or I would be crying . I put in the eek before last in BP oil. It was not @ $32.18 since 1996 except in 2010 for a few days. Sure enough, it went down 10% in 10 days. When it stops going down, I dont know, but if I invest more, it will go down more. The dividends are good@ 7.5%, the price seems very low, oil can't stay this low for too long. I still thick it will be a good investment for the long run. I also put money into AGNC. It did well tip today. Is anyone pulling out of their investments? I think it's too late to pull out now.

For me selling would be a huge mistake. The stock market goes up more than it goes down.