Investing in Your 20s and 30s For Dummies by Eric Tyson

Author:Eric Tyson
Language: eng
Format: epub
ISBN: 9781119296614
Publisher: Wiley
Published: 2016-06-02T00:00:00+00:00

Highlighting How to Invest in Stocks

When you invest in stocks, you have lots of options. In addition to the tens of thousands of stocks to choose from, you can invest in mutual funds, exchange-traded funds (ETFs), or hedge funds.

Investing in stock mutual funds and exchange-traded funds

Mutual funds take money invested by people like you and me and pool it in a single investment portfolio in securities, such as stocks and bonds. The portfolio is then professionally managed. Stock mutual funds, as the name suggests, invest primarily or exclusively in stocks. (Some stock funds sometimes invest a bit in other stuff, such as bonds.)

If you’re busy and realize your lack of expertise analyzing and picking stocks, you’ll love the best stock mutual funds. Investing in stocks through mutual funds can be as simple as dialing a toll-free phone number or logging on to a fund company’s website, completing some application forms, and zapping off the money you want to invest.

ETFs are newer versions of mutual funds. The best ETFs are in many ways similar to mutual funds except that they trade on a stock exchange. The chief attractions are those ETFs that offer investors the potential for even lower operating expenses than those of comparable mutual funds.

The best stock mutual funds and ETFs offer numerous advantages:

Diversification: Buying individual stocks on your own is relatively costly unless you buy reasonable chunks (100 shares or so) of each stock. But to buy 100 shares each of, say, a dozen companies’ stocks to ensure diversification, you may need about $60,000 if the stocks that you buy average $50 per share.

Professional management: Even if you have big bucks to invest, funds offer something that you can’t deliver: professional, full-time management. Mutual fund managers peruse a company’s financial statements and otherwise track and analyze its business strategy and market position. The best managers put in long hours and possess lots of expertise and experience in the field.

Low costs: To convince you that mutual funds and ETFs aren’t good ways for you to invest, those with a vested interest, such as stock-picking pundits, may point out the high fees that some funds charge. But high-cost funds aren’t the only ones out there. Through a no-load (commission-free) mutual fund or ETF, you can hire a professional, full-time money manager to invest $10,000 for a mere $10 to $50 per year.

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