What types of Mutual Funds would be best for a recent grad to think about investing in?

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Posted by Evan L (MONEY FORUMS: 4, Answers: 0)
Asked on April 19, 2016 3:37 pm
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Congratulations on graduating, that’s awesome – hopefully you’re set to enjoy a little bit of a break before you start the next step into the real world!

I like your question because you’re thinking ahead and looking to put your money to work. But think about the last time you and your friends talked/argued over the “best” restaurant or the “best” beer…it can be pretty subjective. What’s important to one person may not be as important to the next so a comparison between the two could be ill-fit. So just keep that in mind here…

Before looking for a prescription (i.e. the Mutual Funds), you first want to make sure there is a diagnosis (i.e. some sort of goal).

Even though you may presumably be a younger investor with a lot of time left until retirement…you may not want to be investing your money for retirement. You may want to invest money for a short period of time to keep safe so you can start your own business in a year or two.

If you’re a recent graduate, maybe you have student loans and should be putting money towards paying debt off first.

What types of MFs would be best for you? Start with a “no load” fund…meaning no initial sales charge or commission. If you have $1000 to invest and there is a 5% upfront sales charge, you now only have $950 left to invest. Next, decide if you want to have active or passive investment management. If you think you – or anyone else – can beat the market, ask yourself this question, “Is the magic 8-ball working today to see into the future?” If your answer is no, then you’re most likely going to want to use a passive (or index) strategy. From here, this is where you’ll have to make some more decisions based on your circumstances – what is your appetite for risk? Can you handle big swings of your account value over time? An investor with a longer time horizon and is willing to accept more risk (ie for more reward), is generally going to be an aggressive investor – growth funds, smaller companies, non-US domiciled.

There’s much more to the answer your looking for but this is a start – you may not even want a mutual fund – there are Exchange Traded Funds that have some similar aspects of mutual funds but tend to have much lower costs and can be more accessible as well since many don’t have minimum requirements.

Hopefully this helps point you in the right direction! Congrats again.

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Posted by Corey Purkat (MONEY FORUMS: 0, Answers: 2)
Answered: April 19, 2016 6:47 pm