Chuck Jaffe at Marketwatch compares fund investing to games features on the 'Price is Right'. While the analogy is a touch strained, the concepts are sound:
1. The Bargain Game: Investors looking to buy a fund ultimately should boil their picks down to a select few, and then go bargain hunting. In this case, that means examining a side-by-side description of the funds to see how they intend to accomplish their investment objective. If two funds take the same strategy, the better bargain is clearly the fund with the lowest expense ratio; if they take different strategies in the same asset class, picking the better bargain will mean balancing any additional costs against an expectation of higher returns. If a fund can't convince you that it can deliver more for your money, it's no bargain compared to a lower-cost competitor.
2. Triple Play: The idea is to hit the big prize -- a fund you can count on, that can deliver to your expectations -- in several different asset classes. The first fund tends to be easy -- because it's a broad, safe choice with the fewest chances to go wrong -- but expanding your holdings into sectors, international stocks and more makes subsequent choices more difficult. To win, an investor must own several high-quality funds that move independently, so that a market nose-dive doesn't do permanent damage and scare the investor to dump the whole thing.
3. That's Too Much: In mutual funds, this is a contest investors should play when looking at a fund's expense ratio, and they can win if they remember one simple playing hint. For a stock fund, the ''too much'' number is 1.25 percent; for a bond fund, it's 0.75 percent.
Those numbers keep a fund slightly below average for their broad category; upon seeing costs above those levels, say ''That's Too Much!'' and consider whether it's worth the excess costs. Moreover, solid funds with numbers well below those averages are showing you a key reason for their success.
4. Take Two: In fund investing, the dollar target is the amount needed to be ''set for life,'' to achieve the ultimate goal of lifetime financial security. The key is picking mutual funds -- a few from the thousands of available choices -- that the investor believes can turn current and future savings into that jackpot.
To play successfully, investors should determine their target number, the amount needed to actually reach their goals; this makes the rest of the savings and investment process easier, as it makes it possible to determine the returns needed from funds in order to reach the goal. If your funds can't deliver those necessary returns, investment and/or savings habits most likely need to be changed or the game may be lost."
Chuck Jaffe at Marketwatch compares fund investing to games features on the 'Price is Right'. While the analogy is a touch strained, the concepts are sound:
1. The Bargain Game: Investors looking to buy a fund ultimately should boil their picks down to a select few, and then go bargain hunting. In this case, that means examining a side-by-side description of the funds to see how they intend to accomplish their investment objective. If two funds take the same strategy, the better bargain is clearly the fund with the lowest expense ratio; if they take different strategies in the same asset class, picking the better bargain will mean balancing any additional costs against an expectation of higher returns. If a fund can't convince you that it can deliver more for your money, it's no bargain compared to a lower-cost competitor.
2. Triple Play: The idea is to hit the big prize -- a fund you can count on, that can deliver to your expectations -- in several different asset classes. The first fund tends to be easy -- because it's a broad, safe choice with the fewest chances to go wrong -- but expanding your holdings into sectors, international stocks and more makes subsequent choices more difficult. To win, an investor must own several high-quality funds that move independently, so that a market nose-dive doesn't do permanent damage and scare the investor to dump the whole thing.
3. That's Too Much: In mutual funds, this is a contest investors should play when looking at a fund's expense ratio, and they can win if they remember one simple playing hint. For a stock fund, the ''too much'' number is 1.25 percent; for a bond fund, it's 0.75 percent.
Those numbers keep a fund slightly below average for their broad category; upon seeing costs above those levels, say ''That's Too Much!'' and consider whether it's worth the excess costs. Moreover, solid funds with numbers well below those averages are showing you a key reason for their success.
4. Take Two: In fund investing, the dollar target is the amount needed to be ''set for life,'' to achieve the ultimate goal of lifetime financial security. The key is picking mutual funds -- a few from the thousands of available choices -- that the investor believes can turn current and future savings into that jackpot.
To play successfully, investors should determine their target number, the amount needed to actually reach their goals; this makes the rest of the savings and investment process easier, as it makes it possible to determine the returns needed from funds in order to reach the goal. If your funds can't deliver those necessary returns, investment and/or savings habits most likely need to be changed or the game may be lost."
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