The secret: first, learn how to invest in the best fund companies; and then learn how to invest in their best funds. Some of the best fund companies offer a confusing selection of funds. Here’s how to invest in only their best funds while avoiding the rest.
The very best fund companies are well established large fund families that have been around for years and offer good service with a wide selection of low-cost funds to choose from. Knowing how to invest in their best funds can be worth thousands of dollars to you over time because not all funds are created equal within some fund families. There can be various classes to accommodate different channels of distribution (sales).
You need to learn how to invest and separate the best funds from their more expensive counterparts. The same fund is sometimes packaged with different cost structures to accommodate how it is marketed or sold to the public. For example, there are various fund classes or groups within some fund companies like: Class A, B, or C; or advisor shares vs. investor shares.
If you invest with a financial planner he might put you into one of the best fund families, but not necessarily into their best funds from your perspective… the ones with the lowest cost of investing. Advisor shares could cost you 5% up front in sales charges and/or 2% or more a year for expenses and other charges. If you know how to invest on your own, you could get into a similar fund in that same fund family and pay NO sales charges with yearly expenses of closer to .5% a year.
Some of the best fund companies give you a choice. Do it yourself and save thousands of dollars over the years, or invest through an advisor and pay for their services. Fund companies are in the business of managing and marketing (selling) mutual funds. The more money they manage and the more mutual funds they sell, the more profit they make. Hence, some of them sell funds through multiple sales channels. If there is a middleman in the picture the cost structure of a fund (sales charges, expenses and fees) will be set up so the middleman can get paid.
You can buy some of the low-cost best funds on a discount broker’s website if you have a brokerage account, for a moderate fee or charge. But here’s how to invest in the best funds of the best fund families and have access to their entire offering of free services. Open a mutual fund account directly with one of the major no-load fund companies like Vanguard, Fidelity, T Rowe Price, or American Century. I’ve followed these companies since the 1970s as they have climbed to the top.
First, go to their websites and get familiar. Then, call toll-free for investor information and a free investor starter kit. If you invest with them directly, all of their free services are only a phone call away. I have personally called them all multiple times over the years and referred friends and family. Never once did I hear mention from anyone of poor service or sales pressure.
Remember, you want to invest in no-load funds to avoid sales charges and high expenses. What you save in costs works to increases your investment profits. For example, a $10,000 mutual fund investment can cost you $500 off the top in sales charges and/or $200 a year or more in expenses and fees. By investing directly in no-load funds you can avoid all sales charges, paying as little as $20 a year in expenses. By the time you’ve accumulated a sizable nest egg, the best funds from the best fund companies will have saved you thousands in sales charges, fees and expenses.
The only performance difference between these low-cost funds and their expensive counterparts is the cost of investing. A dollar saved is a dollar earned.