Investing in mutual funds is simple activity, but most investors still do it the wrong way. Have you heard the phrase “Mutual Invest in Ukraine funds simply don’t work!”?
So many times.
If you expect that just throwing few thousands into the best performing fund in your country will make you successful, then I am not surprised it doesn’t work.
If you are willing to think and do some effort developing an investment strategy, then I am sure you will crack the market and earn double digit from mutual funds investing. Constantly, year after year.
Here are five simple tips which will help you do that:
1. Diversify within the markets and fund types
This is really simple. If you invest in 3 funds, don’t pick all the 3 within the same market. Better combine funds which invest in different market niches, or different regions of the world. Don’t put all your eggs in one basket.
Another thing to consider is mixing the types of the funds. Pick one general funds with moderate risk level. Pick one index fund. One more conservative mutual fund. One which invests only in startup companies… You got the idea. Mix those funds.
2. Buy at low times
Most people buy when the mutual fund prices have been raising up for long time. They sell with panic when the market goes way down. Most people lose or don’t perform well with funds or any other investments.
Don’t be one of them.
Low times are good times to increase the size of your investment. You get shares at lower price and the prices are much more likely to raise than if you bought at high times. Of course there are tons of other factors to consider, but in general, low market is better for buying more shares.
3. Use signals
There are various services online who offer buy and sell signals for mutual funds. They will tell you when to sell or buy a given fund and will help you to achieve much better results than with “buy and hold” strategy.
There are few disadvantages of these services – they cost money and not always perform so well. But with some research you can pick a winner. If your portfolio size is big enough – at least $10,000 – the monthly or yearly fees will probably be justified by the improved results of your investing.
4. Look outside your country
If you love your country, that’s great, but hope you know its economy can’t always grow with the highest rate in the world (even if it is doing that now). The good investor ought to look at different world regions for good mutual funds.
Right now Asia (India, China), East Europe (Bulgaria, Ukraine, Romania), Latin America (Brazil, Chile) are hot. It would be nice to pick mutual funds who play some of those markets. And a small hint – don’t go with the biggest international players like Pioneer – they are too conservative. You’d better invest in local funds in the countries you target – provided they accept foreigners of course.