If you’re like a lot of people, you don’t have the first clue about investing, at least not proper investing. To clear up the confusion and help take the sting of intimidation out of the realm of finance, learn a few tips for first time investing to help you grow your wealth, retire with peace of mind, and meet your financial goals.
What is Investing, Really?
The absolute best place to start when it comes to learning about investing is with learning exactly what investing is. Simply put, investing is the act of using your money, rather than your time, to build your money. Sure you can grow your wealth by working more, but there are only so many hours in the day. You can easily burn yourself out working around the clock; hence, learning about investing for beginners.
Compounding Your Returns
There’s no better feeling than watching your investments grow, all without lifting a finger or investing more money. Rather than pat yourself on the back and withdraw some of the money you’ve earned, it’s much better to leave it exactly where it is. Compounding is a financial term that simply means you’re stacking your return on investment, or ROI, the longer your investment is recycled and allowed to grow.
Let’s say you invest $20,000 today when interest rates are six percent. After a year, you’ll have $21,200, compounded annually. Rather than touch a cent of that money, you instead leave it where it is. In a few more years, you’ll have made thousands, all without having to put in a second of extra work. Now, let’s take a look at some options for investing for beginners.
The 3 Big Investing: Exchange-Traded Funds, Mutual Funds, and Certificates of Deposit
Exchange-traded funds, often referred to as ETFs, are one of the most popular investment options. These funds can be either sold or bought on an exchange throughout the trading day. ETFs are linked to the U.S. stock market and make great investments for both beginners and experts.
If you’ve got at least $1,000 to invest, a mutual fund may be ideal for first time investing. Know that you’ll likely have to have at least a $1,000 in your fund in order for it to remain active. Mutual fund investments are an ideal choice for those who are looking to save money for retirement, and they’re even better if you’re currently contributing to either a 401(k) fund or an IRA.
Looking for one of the safest options investments out there? Consider a Certificate of Deposit, also known as a CD, which is insured by the Federal Deposit Insurance Corp, which means you can’t lose money. That being said, this low risk comes with a relatively low return, possibly less than one percent a year. As a beginner, you’ll want to be rather conservative with your first CD.
Finding the Right Amount of Risk
Due to the fact that there’s hardly any risk without reward, you need to know just how much risk you should take when it comes to investing for beginners. The best way to do this is to subtract your current age from 100. Someone who is 20 can invest 80 percent of his or her investment in a risky option, like the stock market. The remaining 20 percent should be funneled into a CD or a U.S. savings bond.
Additionally, you’ll be wise to go over your investing options with an experienced and trusted financial adviser who has worked with beginner investors like you. Know that you’ll have to pay for professional advice, which can be as much as one percent a year. Before deciding on an adviser and agreeing to any fees, check the FINRA BrokerCheck to make sure the individual is well-qualified and currently registered.
No matter your level of risk or your adviser, there are a few standards to adhere to when it comes to investing:
Keep your costs low
Diversify your investments
Make sure you’re investing in a way that matches your level of risk
If You’re Going to Invest, Start Sooner Rather Than Later
Going back to compounding, first time investing should be done ASAP. This isn’t to say that you should rush out and put down money on a mutual fund or CD, just that the earlier you start investing, the more you’ll be able to reap what you sow.
Let’s say you invest $15,000 at the age of 25 when annual interest rates are 5.5 percent. When you turn 50, that investment will have grown to $57,200.89. If you had waited until the age of 35 to invest that same amount of money at the same annual interest rate, you’ll only have $33,487.15 when you’re 50, a difference of $23,713.74. Let that sink in for a moment.
These are just the basics of your many investing options. Do some more digging on your own, and seek out family and friends who invest for more information.
Suze Orman set off quite a stir a few months ago in a New York Times interview. Although some folks were all atwitter to find out she was gay, what really had people in the personal finance world talking was the fact that the most successful personal finance writer in the country had the bulk of her $25 million portfolio in conservative municipal bonds, with only about $1 million invested in the stock market.
My buddy Chuck Jaffe, a MarketWatch columnist and not exactly a Suze fan, had a particularly good time that little factoid. Chuck has often criticized Suze’s advice as too conservative, and her lack of personal exposure to the stock market confirmed his suspicions that she was out of touch with the needs of everyday people. “In short,” he thundered, “the person being trusted as everyone’s financial adviser has a portfolio that few people could live with.”
I think Suze should be allowed to invest any way she wants to, but the whole kerfluffle points up an irony of personal finance columnizing: the more successful we pundits are, the less our lives resemble those of the majority of our readers.
I was thinking about that when J.D. asked if I’d be willing to write a little exposé for his site on how well I follow my own advice.
“I always wonder just how personal finance gurus lead their lives,” J.D. wrote in an email. “Do they really follow the advice they give? Are they frugal? Do they put their money in index funds? Do they drive older cars? I think this is a question many people have. I also think it’s one reason they read Get Rich Slowly: I quite clearly do follow my own advice, or try to.”
So do I — mostly. At J.D.’s request, I’m pulling back the curtain a bit to show you where I walk my talk, and where I’m full of (well-meaning) hot air.
In case you’re not familiar with my work: I’m the most-read personal finance columnist on the Web. I write a twice-weekly column for MSN Money and a nationally syndicated newspaper column. I’m also the author of three books about finance:
You can find out more about me, if you want, at asklizweston.com. But in answer to J.D.’s questions:
Am I frugal? Congenitally. Most of the time.
I grew up in a middle-class family with a dad who worked as an electric journeyman at the local power plant and a stay-at-home mom who had the Depression-era baby’s classic aversion to debt. We had a garden, we canned, we rinsed and reused baggies. My mom went back to work to help pay my college tuition, while I worked two to four part-time jobs each semester to make ends meet. I graduated without student loan or credit card debt.
I’ve never been much of a shopper, and was taught to pay credit card balances in full every month. (I have carried credit card debt a couple of times in my life — for cash flow reasons, not because we couldn’t pay the whole bill.) Since my early 20s, when I started working as a daily newspaper reporter, I’ve saved 15% to 20% — and sometimes more — of my income. Most of it goes into retirement funds and the majority of those are invested in stock mutual funds.
But a lot of the things I used to do to save money I now do mostly to save the environment: things like turning off lights, using a programmable thermostat, walking or biking instead of driving the car.
And now that I travel a lot, I’ve developed an appreciation for luxuries that would have been unthinkable in my salad days: things like membership to an airline lounge and occasionally paying for a first-class ticket, when I can’t qualify for an upgrade with frequent flyer miles. Flying coach these days reminds me way too much of riding the Greyhound bus during college, and I’m lucky enough to be able to afford an alternative.
Do I put my money in index funds? Yes. Mostly.
I’m a confirmed believer that people who think they’re going to beat the market probably are deluding themselves. I know I would be; I’m way too busy to monitor individual stocks or actively-managed mutual funds.
But a recent review of our portfolio showed that while most of our money is in broad-market index funds, we’re still hanging on to a few actively-managed funds I bought before I’d become firmly convinced of the futilely of trying to predict market-beaters. Like the cobbler’s children with no shoes, my portfolio’s overdue for a clean-up and rebalancing. Thanks, J.D., for goading me into it.
Do I drive an older car? Oh, boy. Do I.
I’m the proud driver of a 1993 SUV with—ta-da—250,000 miles on it. I inherited it from my husband, who upgraded to a later-model Volvo. (The man actually cares what he drives, unlike me.) I’d eventually like to replace it with a more fuel-efficient car, but at this point I drive so few miles that it doesn’t make sense to replace it. Besides that, I’m oddly curious to see how long the old beast will hold out.
I’ve also learned a lot about money over the years by making mistakes. I bought “retirement property” when I was in my 20s (anybody want 14 acres in Alaska, 80 miles from the nearest road?). After years of railing about the insanity of the dot-com boom, I sunk $2,000 into a tech fund in — get this — March 2000, about a week before the bubble started to burst. And the last time we bought a house, I forgot (yes, forgot) about closing costs, and had to sell off some investments at the last minute to cover closing costs. (Fortunately, the stock market cooperated with me for once — you’re not supposed to keep short-term money, like down payments and closing costs, in stock or stock mutual fund investments lest they take a dive right when you need the money.)
But yeah, overall I’ve followed my own advice. I’ve avoided toxic debt including credit card debt; put a pile away for retirement; and invested a ton of money over the years in fun and experiences. I’ve traveled around the world, earned my pilot’s license, threw some great parties, took two sabbaticals to care for my dying mother, and am in the process of raising a wonderful daughter (who may turn out to be our more expensive experience yet, but is soooo worth it). I firmly believe that managing money well helps you live life well, and that’s the message I hope to communicate to readers — regardless of where they happen to be on the road to financial health.
Long, long ago, in a mystical forest with good Wi-Fi, Goldilocks opened an investing account with $3,000 to invest.
At first, she considered pouring more money into her retirement accounts (which only holds mutual fund investments). But her Roth IRA was already maxed out for the year. Moreover, she knew that she would need this money sooner than age 65.
“Too cold!” she said.
Next, she considered investing in individual stocks. But even though she’d done her due diligence, she knew that investing in individual securities can be very risky. She didn’t need to become a millionaire overnight – she just wanted to make enough money to buy a cottage in a few years.
“Too hot!” she said.
Finally, she began browsing ETFs. ETFs are generally more stable, diverse, and safe investments than individual stocks, but they’re also more accessible than your retirement account.
“Juuuuust right!” she said aloud.
10 years later, Goldilocks’ investment had paid off – thanks to a steady 10% APY, her $3,000 investment had become nearly $8,000, so she was finally able to pay restitution and legal fees to the family of bears down the way.
Thanks to inherent diversity and steady returns, ETFs are a great place to stash a few grand to help you save for a big expense years or decades down the line.
Large-cap stock ETFs
Large-cap ETFs typically bundle together blue-chip stocks or even an entire index, providing steady, sizeable returns. Warren Buffet once famously said:
“I just think that the best thing to do is buy 90% in S&P 500 index fund.”
So I’ve included two such options on the list.
You’ll also see a lot of Vanguard funds on this list because, well, they’re just awesome all the way around. Vanguard funds are extremely popular among investors because they combine industry-leading returns with incredibly low expense ratios.
Schwab US Large-Cap Growth ETF™
The fund’s goal is to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Large-Cap Growth Total Stock Market Index.
SPDR S&P 500 ETF
The SPDR® S&P 500® ETF Trust seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the S&P 500® Index (the “Index”).
Vanguard S&P 500 ETF
The Vanguard S&P 500 ETF invests in stocks in the S&P 500 Index, representing 500 of the largest U.S. companies.
Vanguard Russell 1000 Growth ETF
The investment seeks to track the performance of the Russell 1000® Growth Index. The index is designed to measure the performance of large-capitalization growth stocks in the United States.
Mid-cap stock ETFs
Goldilocks’ choice – mid-cap ETFs – bundle together companies that have an exciting growth curve before them, but are established enough not to fold overnight.
If you can tolerate a little more risk in exchange for higher potential returns than an index fund, consider these top picks:
Vanguard Mid-Cap Growth ETF
VOT seeks to track the performance of the CRSP US Mid Cap Growth Index, which measures the investment return of mid-capitalization growth stocks.
iShares Core S&P Mid-Cap ETF
IJF seeks to track the investment results of an index composed of mid-capitalization U.S. equities.
Vanguard Mid-Cap ETF
VO seeks to track the performance of the CRSP US Mid Cap Index, which measures the investment return of mid-capitalization stocks.
Schwab U.S. Mid-Cap ETF
SCHM’s goal is to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Mid-Cap Total Stock Market Index.
Small-cap stock ETFs
If you’ve looked at your asset portfolio recently and thought “hmm… needs a little more spice,” then a small-cap ETF might add just the right amount of kick.
These ETFs track small companies with big potential, so they present higher risk but higher potential reward than large- or mid-cap ETFs.
Vanguard S&P Small-Cap 600 Growth ETF
VIOG employs an indexing investment approach designed to track the performance of the S&P SmallCap 600® Growth Index, which represents the growth companies, as determined by the index sponsor, of the S&P SmallCap 600 Index.
Vanguard Small-Cap ETF
VB seeks to track the performance of the CRSP US Small Cap Index, which measures the investment return of small-capitalization stocks.
iShares Core S&P Small-Cap ETF
IJR seeks to track the investment results of an index composed of small-capitalization U.S. equities.
Schwab U.S. Small-Cap ETF
SCHA’s goal is to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Small-Cap Total Stock Market Index.
International stock ETFs
Vanguard Emerging Markets ETF
VWO invests in stocks of companies located in emerging markets around the world, such as China, Brazil, Taiwan, and South Africa.
Vanguard Total International Stock ETF
VXUS seeks to track the performance of the FTSE Global All Cap ex US Index, which measures the investment return of stocks issued by companies located outside the United States.
SPDR® MSCI EAFE Fossil Fuel Free ETF
EFAX seeks to offer climate-conscious investors exposure to international equities while limiting exposure to companies owning fossil fuel reserves.
Vanguard FTSE Developed Markets ETF
VEA provides a convenient way to match the performance of a diversified group of stocks of large-, mid-, and small-cap companies located in Canada and the major markets of Europe and the Pacific region.
Fixed income ETFs
iShares Core U.S. Aggregate Bond ETF
AGG seeks to track the investment results of an index composed of the total U.S. investment-grade bond market.
Vanguard Total Bond Market ETF
BND’s investment objective is to seek to track the performance of a broad, market-weighted bond index.
Vanguard Intermediate-Term Corporate Bond ETF
VCIT seeks to provide a moderate and sustainable level of current income by investing primarily in high-quality (investment-grade) corporate bonds.
Schwab 1-5 Year Corporate Bond ETF
SCHJ’s goal is to track as closely as possible, before fees and expenses, the total return of an index that measures the performance of the short-term U.S. corporate bond market.
What does large-cap, mid-cap, etc. mean?
To start, “cap” refers to market capitalization, or the total value of a company’s shares on the market. For example, if a company has 1 million shares on the market valued at $10 a pop, their market cap would be $10 million.
Large-cap ETFs are comprised of companies each with a market cap of $10 billion or higher. The Vanguard Mega Cap ETF (MGC), for example, contains around 250 of the biggest companies in the USA, from Amazon to Apple. Since they’re often full of blue-chip stocks that provide slow-but-steady returns, large-cap ETFs are considered a safe, long-term investment.
Mid-cap ETFsare comprised of companies each with a market cap in the $2 to $10 billion range. All ETFs are designed to succeed and make money, so mid-cap ETFs are filled with midsized companies that are in the middle of their “growth curve,” so to speak – they’re high-performing, high-potential companies that may become the next blue-chip, so mid-cap ETFs balance risk and reward.
Small-cap ETFsare comprised of companies each with a market cap of “just” $300 million to $2 billion. Fund managers who design small-cap ETFs cast a wide net, aiming to scoop up “the next big thing.” As a result, these ETFs have higher growth potential than most ETFs, but also steeper downside if the smaller companies within end up folding.
International ETFsare, as the name so subtly hints, full of non-U.S. stocks and securities. There are country-specific ETFs, foreign industry ETFs (think non-U.S. automotive stocks), and even ETFs representing emerging markets like sub-Saharan Africa and Brazil.
Fixed income ETFs, aka bond ETFs, give you access to diverse bond investments. For the uninitiated, bonds are like loans you make to companies or governments that they pay back with interest. You can read more about bonds here, but the bottom line is this: fixed-income ETFs provide steady income in the form of dividends, so they’re a good choice if you want a safe investment that gives you a paycheck!
Read more:How To Invest In ETFs
Which type of ETF is right for you?
Well, it depends on both your goals and your risk tolerance.
If you can tolerate some risk in your portfolio, and want your ETF investment to pay off sooner than later (within five years), you may want to consider small-cap and mid-cap ETFs. They’re riskier, but have higher upside potential.
If you’re looking for a safer investment that will multiply your money over a longer horizon (5+ years), a large-cap ETF is probably a fit.
If you’d like your ETF investment to provide a trickle of cashback each month, fixed income ETFs are probably your best bet.
And finally, if you don’t mind doing a little research or believe strongly in the economic performance of a foreign market, you’ll be a fan of international ETFs.
Read more: How To Determine Your Investing Risk Tolerance
About our criteria
With hundreds of commission-free ETFs available, how did these become the winners?
To make this list, ETFs had to impress in all of the following categories:
Earnings potential.Naturally, the first thing looked at was the ETF’s performance over the past five years. A good sign of a healthy ETF is how quickly it bounced back in Q3 2020 after the market panic surrounding the COVID-19 pandemic. Springboarding back and surpassing Q1 levels are a sign of investor confidence, and helped solidify the ETF’s place on this list.
Expense ratio.Next, I looked at the ETF’s expense ratio. Your expense ratio is the percentage of your investment you pay to the fund manager for having shares of the ETF. Although measured in fractions of a percent, expense ratios make a difference – 0.80% of $10,000 is $80 and 0.04% is just $4, so ETFs with an expense ratio below 0.20% were favored.
Fund reputation. You’ll see a lot of repeated names on this list because funds like Schwab, BlackRock (iShares), and especially Vanguard have a proven track record of building well-crafted, reliable ETFs with low expense ratios. Fund reputation matters in the long run because big funds attract big money, which helps to generate higher returns for you!
Solid fundamentals.ETFs aren’t just random grab bags of stock and securities – each one is a carefully curated list, with selection criteria driven by both AI and human logic. There are some wacky and unique ETFs out there – such as Millennial ETFs and Space ETFs – and I’ll cover more of them in an upcoming piece. But this list isn’t for the experimental, exciting stuff – it’s for safe, dare I say boring, places to stash and multiply your savings.
Conscious investing.Finally, this was more of a small thing in the back of my mind, but I wanted each ETF on this list to score average or above average for “conscious capitalism.” No fossil fuels, no sin stocks (learn more about sin stocks here) – and not just because it’s not the way of the future, but because investments in conscious capitalism generally outperform “sinful” investments in the long term.
Commission-free ETFs solve a big problem for young investors
Commission-free ETFs aren’t just great because they’re cheap – they actually solve a pretty serious problem plaguing young ETF investors.
You see, ETFs have heftier commissions and trade fees than stocks because ETFs can be resource-intensive to create. Let’s say you’re a fund manager and you have an idea for an ETF. The process to get your ETF approved by the SEC isn’t unlike getting your new drug approved by the FDA; you have to research a ton, understand the risks, and propose your ETF to the government.
Once your ETF is approved and available, you probably want some additional compensation for your work beyond just capital gains from your ETF.
You don’t want to charge a high percentage trade fee, because big-ticket investors will be turned off. So, instead, you charge a $10 to $20 fee per trade of your ETF.
Big-ticket investors who drop $50,000 on a trade couldn’t care less about a $20 fee, since that represents just 0.04% of their investment. But if you’re a young investor, investing maybe $50 to $100 out of each monthly paycheck, a $20 per-trade fee is way too high – basically pricing us out of ETF investing. 🙁
Thankfully, many brokerages have realized that their per-trade fees are too high for young investors and have eliminated commissions on trades of certain ETFs. At first, funds like Vanguard and Fidelity only let you trade commission-free on their own platforms, but now, they’ve expanded their commission-free goodness to wide platforms like J. P. Morgan Self-Directed Investing.
And it’s not just the junk ETFs that get traded commission-free – in fact, it’s often quite the opposite. Firms like Vanguard and Fidelity will let you trade their most successful ETFs for free – presumably because they don’t really need the commission.
Disclosure – INVESTMENT AND INSURANCE PRODUCTS ARE: NOT A DEPOSIT • NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
If you’re looking for an investment vehicle falling somewhere between your boring retirement account and your exciting individual stock purchases, ETFs are an excellent choice. And now that the big funds are waiving commissions on their top-performing ETFs, there’s never been a better time to dive into the world of ETFs and inject some low- to mid-risk into your portfolio.
ETFs are also an excellent investment if you’re looking to multiply your money and cash out within 2 to 10 years. You can even leave your ETF investment until retirement, if you want, so it has plenty of time to multiply under compound interest.
Not all ETFs are made the same, however – and the SEC has approved some stinkers over the years, for sure. These ETFs, on the other hand, are universally considered top-ranked and well-supported within the investor community – and are a superb place to start.
By Peter Anderson1 Comment – The content of this website often contains affiliate links and I may be compensated if you buy through those links (at no cost to you!). Learn more about how we make money. Last edited August 25, 2011.
Over the past few years of personal finance blogging one of the companies that I’ve heard recommended time and again as one of the best places to invest is Vanguard. The reasons why people love them so much include the facts that they have low costs as compared to so many other companies, they offer a diverse set of index funds to choose from, and even some of their actively managed funds are super affordable when compared to the competition.
Another thing that a lot of folks like is that it is relatively easy to buy into mutual funds at Vanguard with low initial mutual fund investments. Most vanguard funds with exceptions of one, the Vanguard STAR® Fund (which had a $1,000 minimum) had initial investments of around $3000. This past week Vanguard announced that they were lowering the initial investments for a wider range of funds to $1000 in order to make investing with Vanguard that much easier. In addition a variety of other funds have had their fund minimum lowered to $3000.
Vanguard Lowers Target Retirement Fund Minimums
Vanguard announced that they were lowering their fund minimums for their Target Retirement Funds last week, as well as reducing and standardizing minimums for other fund types.
To help investors take the first step toward a more financially secure retirement, we’re lowering the minimum initial investment for our popular Target Retirement Fund series from $3,000 to $1,000, effective immediately. Previously, only one of our funds, Vanguard STAR® Fund, had a $1,000 minimum.
“Investing early and investing regularly are two of the most important things investors can do to help ensure their retirement readiness,” said Vanguard CEO Bill McNabb. “By reducing the investment requirements for our target-date funds, we hope to encourage more individuals to participate in the financial markets.”
In addition, Vanguard is standardizing the minimum investment for Investor Shares of nearly all our other funds at $3,000. Previously, fund minimums for the affected funds ranged from $3,000 to $25,000. This change reduces the minimum investment for 15 Vanguard funds, including some of our oldest and largest actively managed funds, such as the Wellington™ Fund, Windsor™ II Fund, and Health Care Fund.
Target Retirement Funds Affected
Here’s a list of the Target Retirement Funds affected by the lowered minimums:
Target Retirement 2010
Target Retirement 2015
Target Retirement 2020
Target Retirement 2025
Target Retirement 2030
Target Retirement 2035
Target Retirement 2040
Target Retirement 2045
Target Retirement 2050
Target Retirement 2055
Vanguard Now Even Friendlier For Newer Investors
Vanguard has been known as a friendly place for newer and experienced investors alike, but I think that this move will most likely be one that ingratiates them even more to the newer investors who previously may not have had the $3000 to start an account. $1000 is that much more accessible to newer investors who just want to test the waters and get started investing – even if they don’t have a ton of money to work with.
As Vanguard mentions in their post – investing early and regularly are two very important pieces of the puzzle – and this move will most likely help a lot more people to get started earlier. I think I’ve mentioned in the past that I wished Vanguard would reduce the minimums on their funds – especially the target retirement funds. Others including Mike at obliviousinvestor.com has also written about how they wished Vanguard would get rid of minimums to make their funds more accessible. Now they have, and I’m sure investors everywhere are happy with the change. I know I am.
What do you think? Are you more likely to invest with Vanguard now that they’ve reduced their minimums for so many of their account types? Do you use Vanguard? Tell us your experience in the comments!
Webull is an online brokerage that offers commission-free trading on stocks, options, and ETFs. Key features of the platform include real-time market data, advanced charting tools, and a customizable newsfeed.
With most investing apps now offering commission-free trading, online brokers must find more creative ways to stand out. Robinhood, for example, is now offering a 1% match on IRA contributions. Webull, on the other hand, tries to place the focus on the customer by offering free stocks, fractional share investing, a user-friendly trading platform, extended hours trading, and 24/7 support.
But is Webull a suitable platform for beginner investors? In this Webull Review, I cover Webull’s trading platform, key features, pros and cons, and more.
Launched in 2017, New York City-based Webull is a self-directed investment platform that offers commission-free trading. You can buy and sell stocks, options, exchange-traded funds (ETFs), and even cryptocurrencies. And unlike many newer online brokers, you can trade over-the-counter (OTC) stocks with Webull.
Webull describes itself as “a financial company with the customer at heart, the Internet as our foundation, and technology as our lifeblood.” The company delivers on this description by providing a user-friendly investment platform, free real-time quotes, multiplatform accessibility, full extended hours trading, and 27/7 online support.
No deposit minimums
Hold crypto alongside stocks, ETFs, etc.
Taxable or IRA accounts available
Supports margin trading
Paper trading option
Access to initial public offerings (IPOs).
Webull Community allows you to share investment strategies with other investors on the platform.
24/7 online customer support
Free stock bonus, as well as a referral bonus program
Is Webull Legit?
Yes, Webull is 100% legitimate. They are a US-based broker-dealer, and a FINRA, SIPC, NYSE, and NASDAQ member. It’s estimated that Webull has more than 12 million users and over $40 billion in Assets Under Management (AUM).
At the time of this writing, the company has a rating of 4.4 out of five stars from more than 174,000 Android user reviews on Google Play and 4.7 out of five stars among more than 275,000 iOS user reviews on The App Store.
Unfortunately, they rate poorly with other major rating agencies.
Webull has a Better Business Bureau “F,” the lowest rating on a scale of A+ to F. It scores 1.07 out of five stars, though that rating is based on just 54 reviews.
The company doesn’t do much better with Trustpilot, where it rates 1.3 out of five stars, or “Bad”. However, it’s worth noting the Trustpilot rating is based on just 137 reviews.
Webull Account Types
Webull offers two taxable account types: cash and margin. With the cash account, your buying power is limited to the funds you have on deposit. The margin account allows you to use leverage for the purchase of securities in excess of the cash value of your account.
The margin account requires a minimum of $2,000 to be maintained in the account at all times. Since a margin account will involve leverage, you must maintain a minimum account balance of $25,000 for unlimited day trades (see below).
You can also open a Traditional, Rollover, or Roth IRA with Webull. Each user can have one IRA account, but you must have an individual account before you can open an IRA.
Day Trading Rules
According to FINRA rules, you can make no more than 4 day trades in a margin account within five business days; otherwise, you will be flagged as a pattern day trader (PDT). That will trigger the requirement of the $25,000 minimum balance.
Margin accounts are also available for LLCs, C-Corps, and S-Corps with 2X overnight leverage and 4X day trading leverage.
Webull Trading Platform
The platform offers intuitive tools and support for traders and supports extended hours of trading, both before and after the market closes.
You can do the following on the Webull trading platform:
Stock market trading ideas from top traders
Sort stocks between top gainers, top losers, and most active and best-performing industries.
More than 50 technical indicators and 12 charting tools.
Quant Ratings to provide an overall rating for each stock based on objective data.
The ability to analyze your past trading performance to look for areas of improvement.
Real-time stock alerts to notify you of price action and technical conditions.
In addition, you can execute the following orders:
Trailing Stop order.
Stop-Loss/Take-Profit orders (Bracket orders)
One-Triggers-the-Other order (OTO)
One-Cancels-the-Other order (OCO)
One-Triggers-a-One-Cancels-the-Other order (OTOCO).
Webull offers margin trading for both long- and short positions. You must maintain a minimum account balance of $2,000 in your margin account to qualify for margin trading. The account will provide up to 4X buying power per day trades and 2X for overnight trades.
Webull Paper Trading
Webull offers their Paper Trading feature to help you learn how to trade or to become a better trader without risking real money. And unlike some paper trading accounts offered by other brokers, Webull Paper Trading comes with unlimited virtual cash.
You can take advantage of real-time quotes, explore integrated charts with indicators, and set up price alerts, the same as you would with live trading. The feature offers more than 50 technical indicators and 12 charting tools. Paper trading can be used for options trading practice.
Initial Public Offerings (IPOs)
IPOs are when a private corporation offers stock to the public for the first time. The stocks are in registration and awaiting listing on the secondary market. The registration phase allows the issuing company to raise capital from public investors, who will be the first to receive the stock as of the listing date. In theory, it’s an opportunity for investors to get in on a newly listed company as it is going public.
Webull makes IPOs available to investors. You can locate IPOs by going to the Market page, then to the IPO Center for a list of available offerings. You can even subscribe to notifications of upcoming IPOs as they become available.
You can trade cryptocurrency on Webull commission-free. As is the case with most cryptocurrency exchanges, Webull charges a spread of 100 basis points on both the purchase and sale of crypto. You will need a minimum of $1 to begin trading crypto.
Crypto trading requires either a cash or margin account for crypto trading (no IRAs). You can trade 44 cryptos, including Bitcoin, Ethereum, Litecoin, Dogecoin, Stella Lumens, Ethereum Classic, Cardano, Tazos, USD Coin, and many more.
Crypto trading hours are from 5:30 p.m. to 6:30 PM, Eastern time, seven days per week (23 hours per day).
Crypto Wallet. Webull offers a crypto wallet so you can buy, sell, store, and transfer crypto to and from the wallet.
Stock Lending Income Program
This program allows you to earn extra income on fully paid stocks in your account. If you allow Webull to borrow certain stocks, you’ll be paid interest while those stocks are loaned out.
Apex Clearing, Webull’s clearing agency, will identify fully paid stock in your account, which is considered “in demand” based on the market. You will be paid 15% of the interest earned by Apex Clearing on the loaned stock.
For example, if Apex earns 10% per year, you’ll earn 1.5%. Interest earned through the program is credited daily and paid monthly.
Webull adds a social component to its investment platform. You can participate with millions of other Webull investors to discuss market and exchange strategies, and swap ideas with other investors.
How Does Webull Make Money if they Don’t Charge Fees?
Webull charges very few fees, but they do charge some. After all, they can’t stay in business without any revenue. Here is a list of Webull revenue sources:
Payment for Order Flow (PFOF). This is a common practice among commission-free retail brokers. When Webull sends trades to market makers, they receive rebates for the practice. This income flow is part of the reason why brokers can allow commission-free trading.
Securities lending. This is another common practice in the brokerage industry. Webull uses the services of Apex Clearing as their clearing agent. Through the Stock Lending Income Program, Apex can loan out investors’ shares to other investors and institutions, usually for short sales. Those borrowers will pay interest to Apex, a portion of which is rebated to Webull.
Interest on cash balances. Since Webull doesn’t pay interest on uninvested cash held by investors, the company retains any interest earned on those funds from outside sources.
Interest on margin trades. When you use margin to purchase securities, Webull charges interest which represents income to the company.
Deposit and withdrawal fees. Webull charges fees of between $8 and $45 per transfer for both deposits and withdrawals made by wire.
The basis point spread on crypto trades. Webull earns a 100-basis point spread on the purchase and sale of cryptocurrencies.
Income Tax Reporting
Webull provides a consolidated Form 1099, which includes reporting information from 1099-B (transactions), 1099-DIV (dividend income), 1099-INT (interest), and 1099-MISC (other income and information). The form can be downloaded from the Webull app.
Webull is a fully regulated broker-dealer, and your account is protected by SIPC insurance for up to $500,000 in cash and securities, including $250,000 in cash. For additional protection, Webull offers two-factor authentication for an added step on accessing your account and to prevent unintended parties from entering your account.
Free Stock Bonus and Referral Bonus
Webull is currently offering a free stock bonus to include free fractional shares in two stocks. The stock will be worth between $3 and $3,000, which could make the bonus as high as $6,000 in total. You must be new to Webull and meet other eligibility requirements.
You can also receive fractional shares in four, eight, or 10 free stocks by depositing any amount into your new account within ten days. Each fractional share will be valued between $3 and $300. That means you can earn up to 12 fractional shares with a total value of as much as $9,000. Stock rewards must be claimed within 30 days, or the offer will expire.
Under the Webull Referral Bonus, refer family and friends to Webull, and you’ll receive three free shares of stock. Refer three friends, and you’ll receive nine shares. Once you’ve received nine shares, each successful referral will provide you with two free stocks. Each share of stock will be worth between $12 and $1,400.
Your referral must use your unique referral link, and the free stock will be issued when the new user opens a brokerage account with an initial deposit of at least $100.
How to Sign Up for a Webull Account
You can sign up for Webull from either the website or the mobile app by clicking “SIGN UP” at the top of the page. You’ll need to enter your phone number and a referral code if you have one.
Webull will require you to supply your name, US residential address, date of birth, taxpayer identification (Social Security number or individual taxpayer ID number), telephone number, and citizenship.
To verify your identity, Webull may ask for copies of your driver’s license, passport, or other information as necessary.
Due to Webull’s review process, it will take a minimum of 24 hours to open your account. More time may be needed if manual verification of information is required. Webull will perform a soft credit check, which will not negatively impact your credit score.
Funding Your Account
You’ll need to connect a bank account to fund your Webull account. Webull will make two micro-deposits to your account to confirm a valid account connection. Once verified, you’ll be able to begin transferring funds to and from Webull.
The easiest way to fund your account is through ACH transfers, which are free to complete. (Note that Webull charges domestic and international wire transfer fees.)
ACH deposits initiated before 4:00 PM Eastern time will give you instant buying power, enabling you to begin trading immediately. However, the instant buying power feature is a provisional credit representing a portion of the deposit. Full ACH deposits are generally available on the fourth or fifth business day after the ACH is initiated.
Alternatively, you can transfer securities from another broker into your Webull account. The transfer securities must match those available through Webull.
Webull Pros and Cons
There’s plenty to like about Webull, but the platform also has limitations. Here’s my list of Webull pros and cons.
No minimum initial investment
Get free stock when you open an account and make a deposit
Available crypto wallet where you can manage your cryptocurrency holdings
Connect with millions of investors in the Webull Community
24/7 online support
No joint taxable accounts, custodial or trust accounts
You can’t invest in mutual funds, penny stocks, or bonds
Must have a taxable account to open an IRA
No dividend reinvesting option
No interest on uninvested cash
Fees for domestic and international wire deposits and withdrawals.
Before signing up with Webull, I recommend checking out these alternatives, which offer many of the same features as Webull.
Robinhood is a popular online brokerage that offers zero-commission trades of stocks, options, ETFs, and cryptocurrency. No minimum deposit requirement exists, but like Webull, Robinhood doesn’t allow bond or mutual fund trades. One very interesting feature: Effective December 2022, Robinhood now offers IRA accounts with a 1% match, the first online brokerage to do so.
According to Robinhood, “the IRA Match is an extra 1% that Robinhood adds to eligible contributions to your IRA. It’s not counted toward your annual contribution limits and is typically available to invest immediately.” For more information, check out our full Robinhood Review.
Public is an easy-to-use trading app that is geared toward new investors. Like Webull and Robinhood, Public doesn’t charge any trading fees. You can also buy fractional shares and connect with other users in the Public social community. That said, intermediate traders will want to steer clear of Public due to their lack of advanced trading options – they don’t offer IRA accounts and have little in the way of market research tools.
Learn more in our Public Review.
Interactive Brokers (IBKR) is a truly global trading platform offering investors access to 150 markets in 33 countries. You can also trade in more than 24 currencies. Like Webull, there are no commission fees on stock and ETF trades. Interactive Brokers is hands down the more powerful platform for sophisticated traders looking for access to global markets, but it may be overwhelming for new and intermediate investors.
Is Webull good for beginners?
Webull is a safe trading platform for new investors. Accounts are protected by SIPC insurance for up to $500,000, and the platform uses numerous security features, including two-factor authentication.
We also like that Webull has no minimum initial investment requirement, though you will need to deposit funds to begin trading. And as a beginning investor, you can certainly benefit from the paper trading account with unlimited virtual cash.
However, other investment brokers may be a better choice for new investors. Webull is designed primarily for active traders and those with at least an intermediate level of experience. Larger brokerage firms will be able to provide higher levels of customer service and a greater variety of account tools and educational services.
What is the minimum deposit for Webull?
There is no minimum deposit requirement for a Webull account, but a $2000 minimum balance is required for all margin accounts.
What is the downside to Webull?
The main drawbacks to Webull include the lack of a dividend reinvestment program and the inability to buy fixed-income and mutual fund investments.
Does Webull work in Canada?
Webull is a US-based online broker. Because it’s not registered in Canada, it’s not available to Canadian citizens.
Final Thoughts on Webull
Webull is an intuitive trading app where you can trade more than 40 cryptocurrencies on the same platform where you hold more traditional investments. They offer plenty of investment tools, including margin trading, day trading, and short sales.
And if you’re new to Webull or have friends to refer, you can take advantage of free stock bonuses.
While Webull is geared more toward intermediate and advanced traders, its intuitive trading platform shouldn’t overwhelm new traders. That said, beginner investors may want to give Robinhood and Public a long look before signing up with Webull.
When planning for the overall financial security for yourself and those you love, life insurance should typically play a part. This is because the proceeds from a life insurance policy can be used to ensure that dependents and survivors won’t be left with having to pay a debt or other expenses out of their own pockets. These funds can also be used for ensuring that the daily living expenditures of a spouse and children can continue – without those you care about having to go into a financial hardship, or even to change their lives drastically.
If you are in the process of shopping for life insurance – or you soon will be – then several key factors are important to keep in mind. These include securing the right type and amount of insurance coverage, as well as making sure that the company you plan to purchase the coverage through is safe and stable financially, and that it also has an excellent reputation for paying out its policy holders’ claims. One carrier that meets these standards is Primerica.
The History of Primerica Insurance Company
Primerica has been in the business of offering term life insurance that is affordable since 1977. Since its beginning, the company has had a key focus on serving middle America’s “Main Street” families in neighborhoods across the country. Primerica was started by Arthur (Art) Williams, a former high school football coach turned life insurance advisor.
Within just the first few years of operation, the company contracted with Massachusetts Indemnity and Life Insurance Company – and by 1982, the company had gone public and started trading its stock on the NASDAQ market.
The company takes more of an educational approach, and in addition to insurance coverage, it also focuses on educating its prospects and customers. For instance, the company’s complimentary Financial Needs Analysis asks some important questions to pinpoint exactly where an individual or family is on their goals, and then it suggests various financial solutions that fit both their needs and their budget.
There are currently three components to Primerica’s life companies. These include the following:
Primerica Life Insurance Company
Primerica Life Insurance Company of Canada
National Benefit Life Insurance Company
Primerica’s products are offered through independent representatives, many of whom work on a part-time basis. Over time, Primerica has earned numerous awards and accolades, including being named to the 2015 Forbes list of America’s 50 Most Trustworthy Financial Companies. The company has it main headquarters in Duluth, Georgia.
Primerica Life Insurance Review
Today, Primerica is a leading provider of term life insurance in the industry. The company pays out an average of $3.5 million in benefit claims every day – and more than 90 percent of these allegations are paid out within 14 days of the claim being submitted. Currently, Primerica serves more than 4.3 million customers and policy holders.
The company currently has more than $728 billion of life insurance in force. A significant portion of the policies that are sold via Primerica agents are done so using the “Buy Term Invest the Difference” philosophy. This alludes to having clients purchase affordable life insurance, and use the remainder of their funds (that may have been spent on more expensive permanent insurance protection) to invest in mutual funds and other appropriate investments for the client.
Using this concept, Primerica believes that people should look at purchasing life insurance in the same manner that they view buying auto, health, or home owner’s insurance – in other words, maximize the amount of the coverage and invest the difference. Doing so can provide individuals and families the ability to accumulate more money, and in turn, live a stress-free retirement in the future.
Certainly, one of the key advantages of the term life insurance products that are offered through Primerica is the lower rates (as compared to a comparable permanent life insurance policy). While an insured can get a nice amount of coverage for a reasonable rate, especially if they are young and in good health at the time of application, it is important to keep in mind that term life insurance is only issued for a set period, such as ten, fifteen, twenty, or thirty years. Then, once the initial policy has expired, it will be required that the insured renew the policy if they want to keep coverage in force. This, however, will typically be at a much higher premium rate, given the insured’s then-current older age.
However, for those who are seeking a way to cover “temporary” needs, such as the payoff of a mortgage and ensuring that a child or grandchild has enough money to attend college in the future – then a term life insurance policy could be a viable option.
Insurer Ratings and Better Business Bureau (BBB) Grade
Due to its robust and stable financial footing, and the timely way it pays out claims to its policy holders, Primerica has earned high ratings from the insurer rating agencies. This includes an A+ (Superior) by A.M. Best Company, of which less than 20 percent of life companies meet this standard.
Also, Primerica has been an accredited company via the Better Business Bureau (BBB) since January 1, 1980. The company has been provided with a grade of A+ by the BBB, on a scale of A+ to F.
Over the last three years, Primerica has closed out a total of 140 customer criticisms through the Better Business Bureau (12 of which were closed out within the past twelve months). Of the total 140 customer complaints, 77 of them focused on problems with the company’s products and services, 33 focused on billing and collection issues, and the other 30 had to do with advertising and sales issues.
Life Insurance Coverage Offered Through Primerica
Primerica offers straightforward and affordable term life insurance coverage. Many of the policies that are sold by this company offer renewal options, so that the insured may continue coverage once the initial period of the policy has been surpassed.
There are many different ways in which policy holders may structure their insurance coverage through Primerica, as the company offers individual riders and add-ons like terminal illness benefit, waiver of premium, and increasing benefit riders.
Primerica offers value through their unique approach to buying life insurance. Its primary life insurance offerings include the TermNow and Custom Advantage plans. Both options offer guaranteed insurability to the insured’s age 95, as well as a terminal illness benefit, industry leading renewal options, affordable renewal rates, and the flexible use of riders that can help with increasing the coverage and / or better “customizing” the policy to better fit the insured’s needs.
Other Products and Services Available Via Primerica Insurance Company
In addition to term life insurance coverage, Primerica also offers several other products and services that can provide solutions to its clients. These include:
Investments – Primerica offers mutual fund investments so that clients can put away money for the future. In many cases, clients may have the option of either investing a lump sum, or dollar cost averaging whereby they invest a certain amount of money on a regular basis over time.
Auto Insurance Coverage – Primerica offers auto insurance coverage through the Primerica Secure Referral Program. Here, clients can obtain competitive rates in ten minutes or less, and most individuals will qualify for this coverage.
Home Owners Insurance Coverage – As with the auto insurance coverage, the home owners insurance coverage that is offered via Primerica is done through the Primerica Secure Referral Program, which can make it easy for individuals to find out the quote they are eligible for, and to move forward if it is the plan they choose.
Long Term Care Insurance – Primerica also offers long-term care insurance coverage via some of the oldest and most experienced companies in the long term care insurance market place. Having this coverage can help clients to ensure that their other assets and savings are secure and in place for their originally intended purpose.
Pre-Paid Legal Services – While many people may need the services of a lawyer, not everyone can pay the high fees that attorneys are known for charging. With legal insurance protection, though, the playing field is leveled. By having a legal insurance plan, clients can access a plethora of different services, such as will creation, legal consultation, motor vehicle-related benefits, durable powers of attorney, IRS audit assistance, and probate benefits.
Identity Theft Defense – Today, identity theft is the fastest growing crime – which puts everyone in harm’s way when it comes to having their identity stolen. By having identity theft protection, though, if an incident occurs, the client may be covered from a financial perspective, as well as via a long list of other support services.
Debt Reduction / Payoff Solutions – The debt solutions that are offered through Primerica can help individuals and families to get on the road to debt freedom. The Primerica Debt Watchers product allows clients to use the information that is contained in their Equifax Credit Report to put together a simple to understand plan towards paying off their debt. This differs from many of the other debt relief products that are found in the market place today because it doesn’t just limit clients to seeing debts on their credit report, but rather to create an overall plan for becoming debt free.
Also, in addition to the other educational solutions and concepts that may be provided include the following:
High Cost of Waiting
Pay Yourself First
Theory of Decreasing Responsibility
Rule of 72
Power of Compound Interest
Being out of debt, and well protected with life insurance and other coverage, can make clients’ lives much easier.
How to Get the Best Life Insurance Rates with Primerica Insurance Company
If you are seeking the best rates on life insurance through Primerica – or from any other life insurance carrier – then it is recommended that you work in conjunction with an independent life insurance agency or broker. In doing so, you can compare different life insurance policies, companies, and premium prices – and from there, you can choose which one will be the greatest for you.
When you are prepared to proceed with finding out the best coverage option for you, we can offer support. We are an independent life insurance brokerage, and we work with many of the best life insurers in the market place today. We can get you all the necessary details needed to make a well-informed life insurance coverage buying decision. We can do so for you very swiftly, simply, and conveniently – all from your computer – and without you having to meet in person with a life insurance agent.
We understand that the process of purchasing a life insurance policy can seem a tad bit overwhelming. There are many different variables and components you need to consider while choosing the right coverage for your needs. But there is good news. This process can be so much easier when you are working with an ally on your side who can point you in the right direction. So, contact us today – we’re here to help.
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MintLife is continuing their contribution to Financial Literacy Month by tacking another personal finance topic: mutual funds. You can catch up on this ongoing series, by reading the first installment, “What are Equities?”
What is a Mutual Fund?
Investing can be pretty scary stuff. Financial fraud, volatile markets, crooked brokers, macroeconomic headwinds – we are constantly bombarded with news of investors losing their shirts after dipping their toes in the nebulous investment universe. But investing doesn’t have to be such a daunting task. There are a number of ways the average investor can distribute risk across their portfolio so that they can sleep easy at night. One of the most popular ways to do that is to invest in a mutual fund.
The mutual fund is the quintessential collective investing scheme. It is basically a variety of securities (stocks, bonds, etc), which are owned collectively by a large number of investors. The securities make up a single fund and shares are sold to investors based on their collective value. It is managed by a group of financial professionals who make all the investment decisions on the fund’s behalf. If the securities in the fund increase in value, then the value of your shares also rise, equating to a positive return on your initial investment.
The aim of a mutual fund is to yield a greater return for their investors than they would have normally received by investing their money alongside an index of some sort, known as a benchmark. For example, if a mutual fund is invested primarily in equities, which are stocks (see last week’s piece), then the fund managers will try to beat the performance of the Standard and Poor’s 500 index, which is a stock index that tracks the rise and fall of 500 stocks that trade in the US.
Which Mutual Funds Should I Invest In?
There are over 10,000 mutual funds available in the US for you to invest in. There are massive, multi-billion dollar funds and there are small boutique funds. There are funds that invest in higher-risk securities and some that invest in securities that have a very low risk profile. But for the most part, mutual funds tend to be divided into three main types: equity funds, fixed income funds and money market funds. Equity funds invest in stocks; fixed income funds invest in debt, like bonds; and money market funds invest in super safe short-term debt securities, like bonds issued by the US government.
Money market funds yield the lowest return for investors out of the three because it is very low risk. The equity and fixed income funds have varying levels of risk and returns based on what they are holding. When you go to invest in a fund, you will be able to see the risk level of the portfolio and can invest accordingly. Funds that are labeled as “growth” funds tend to be riskier than those that are “value” funds. Your risk tolerance is based on your comfort level and on how close you are to retirement.
Why Invest in a Mutual Fund?
Mutual funds are a solid option for people who don’t want to get their hands dirty investing, but who also aren’t keen on seeing their cash locked away in some low to no yield checking or savings accounts, either. There was a time that you could park your cash in a bank savings account or a bank certificate of deposit and receive a relatively decent return on your money. But with the Federal Reserve keeping interest rates so low due to the sluggish economy, chances are you would be better off just stuffing your cash under your mattress than locking it away in a bank.
By pooling your money with others in a mutual fund, you not only get to spread out the risk, but you also are able to take a lot of the guesswork out of investing. You don’t have to spend hours researching a particular stock or a bond – that work has been done for you (hopefully) by the fund managers. And you don’t have to pay the high brokerage fees to buy and sell a security – the fund manager can do that at a much cheaper rate. All you have to do is hand over your cash and go on your daily business. You’ll receive a statement in the mail every few months or every year updating you on how the fund has performed.
The Disadvantages of Investing in a Mutual Fund
But while there are many advantages in investing in a mutual fund, there are also several disadvantages as well. The one that always miffs investors is the fees. Generally, investors have to pay a fee to buy and/or sell their shares in the mutual fund. This fee is known as a “load” and it covers the sales and marketing expenses to the broker who sold you the fund.
When you are invested in a fund you need to pay a few other fees to maintain it. First, there is the management fee, which covers the salaries and personal expenses of the managers running the fund. This fee is usually worth 1% to 2% of the assets you have invested in your portfolio. The fee is paid daily, but is calculated on an annual basis. Some funds also have a marketing fee, known as a 12b-1 fee, which can cost investors around 0.5% to 1% annually. These two fees make up the firm’s management expense ratio. The lower the fees as a percentage of its assets, the more efficient the fund is at managing your money. Separate from those fees is another fee to cover all the trading expenses associated with the portfolio. This fee fluctuates based on the strategy of the fund. For example, if the fund buys and sells securities often, the fee will be higher than if the fund tends to buy and sit on securities for a while.
Beyond fees there is performance. Mutual fund managers aim to beat an index, not make you money. This means that if the S&P 500 index was down 20% last year, a mutual fund manager would be considered successful if the fund was only down 19%. An absolute return, which is making your money grow regardless of how the broader market performs, is not in a mutual fund manager’s mandate. Sure, the fund manager would like to make you money if they can, but they feel like they have done you a service, and earned their fee, if they were able to mitigate your losses compared to that of the broader market.
There have been many studies conducted over the years that try to track the long-term performance of mutual funds. The results mostly show that, net of fees, the mutual fund industry as a whole has not returned a lot of money to investors. Some blame the high fees, while others say that fund managers aren’t doing a good job. But it is sort of unfair to lump the entire industry together. There are, after all, thousands of funds invested in vastly different securities.
The Bottom Line
The key is to put your money in funds where you think have the best chance of growing over a set time. While you can invest and forget for a while with a mutual fund, you still need to rebalance your portfolio – at least yearly. So if there is a recession, in say, Asia, forecasted for the coming year, you might want to pull your money out of the mutual fund that owns a lot of Asian stocks and put it in one that invests in something else safe, like US debt. So while mutual funds are a great alternative for people who don’t want to follow the day-to-day drama of the market, it still doesn’t mean you can check out completely.
Cyrus Sanati is a frelance financial journalist whose work has appeared in dozens of leading publications, including The New York Times, BreakingViews.com, and WSJ.com. Follow Cyrus on Twitter @csanati
Save more, spend smarter, and make your money go further
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