Best Mutual Fund Investment Strategy For 2011 and 2012

For most people the best mutual fund investment and the best investment strategy for 2011 and 2012 can be found in a single package, which comes complete with both fund and strategy. Before you invest money, here's how to find the best fund with a strategy that fits you.

People invest money in a mutual fund because these investment packages offer professional management, each fund with its own investment strategy. The problem is that even the best fund in the stock or bond arena can get casual investors into trouble if they just buy, hold, and ignore it. The same stock (equity) fund that doubled in value between early 2009 and 2011 could well lose half its value if 2011 and/or 2012 turn out to be bad years for the stock market. History has proven that most people invest money without a sound investment strategy. They simply buy, hold and ignore.

Remember this: the normal investment strategy for a stock fund is to invest about 98% of the portfolio in stocks. The same is true in the bond department. The best investment strategy for most people is to invest money in a variety of both stocks and bonds, with some money tucked away earning interest with high safety. If you don't have the time or expertise necessary to invest money and stay on top of all three areas, what's your best mutual fund to invest money in?

The best fund for most folks falls into a category called BALANCED, ASSET ALLOCATION, or TARGET RETIREMENT because the investment strategy here is to invest money in all three areas, while keeping the investor portfolio balanced (ratio of stocks to bonds) throughout the years. The TARGET types take investment strategy one step further by reducing risk over time to adjust for the fact that the investor is growing older. In other words, all in one package you get the best mutual fund complete with the best investment strategy for 2011, 2012 and beyond. You can simply buy and hold, and let management do the rest.

Now, let's get more specific, using target retirement funds as our example. Investment strategy and portfolio asset allocation is usually described as CONSERVATIVE, MODERATE, or AGGRESSIVE. The higher the target number, the more aggressive (risky) a target fund is - meaning a higher allocation to stocks vs. bonds and safer investments. For example, a Target 2000 might be labeled as conservative with 20% of the portfolio in stocks, while a Target 2035 labeled as moderate could have 80% invested in stocks. Look at the asset allocation percentages before you invest money! A target fund with a target number higher than 2040 can have 90% of assets invested in stocks.

With all of the uncertainty surrounding 2011 and 2012... including high unemployment, a sluggish economy, and the threat of higher inflation... many people need a more conservative fund in order to sleep at night. If you can relate to this the best mutual fund investment for you might be a Target 2000 with about 20% of its portfolio in stocks, 35% in bonds and 40% in safer areas that pay interest. Or, you might want to invest money in a Target 2010 with about 50% in stocks and most of the rest in bonds.

You can make the best of it in 2011, 2012 and beyond if you do a little homework before you invest money. Go to websites like Fidelity and Vanguard, the two largest mutual fund companies, to get a handle on the best mutual fund that fits your risk profile. If you want to just invest money and hold on, your best mutual fund investment is some form of balanced fund where the fund company takes care of the investment strategy for you.

Author James Leitz teaches investment basics, stocks, bonds, mutual funds and how to invest in his investing guide for beginners called INVEST INFORMED. Put Jim's 40 years of investing experience to work for you and get up to speed at http://www.investinformed.com/. Learn how to invest.

The Unbeatable Strategy Of Dollar Cost Averaging

Most mutual fund investors are all about choosing a particular fund or funds. But that's only half of the real story when investing in mutual funds. The way money is deployed into those funds is at least as important as the particular fund the money goes into.

The quick basics on dollar cost averaging (DCA) are simple: The same amount of money put into a fund at the same frequency, commonly once a month. No deviation from this rule.

DCA makes price volatility an advantage. Share value drops, your monthly contribution buys more shares. Share value increases, your dollars buy less.

Beautifully simple. The recent economic debacle from '08 gives a good example: The Dow dropped to around 6500 from 12800. If you'd been DCA at that time your monthly contribution would have bought shares at a 50% DISCOUNT. As you can see with basic math, this pulls your cost basis down dramatically.

Conversely, if you'd panicked during this time and reallocated less, or stopped altogether, you'd have missed a super BUYING OPPORTUNITY. If you'd sporadically invested when your emotions told you to, you'd likely have missed some opportunity too.

The '08 crash is an extreme example, but it does illustrate the point. The numbers may change, but the system doesn't.

The ONLY way to make money in stocks is for share price to increase from purchase price. This means you'll need to accumulate more shares at lower than average prices, which is what this whole DCA business is about. And haphazardly throwing money into stocks that "look good to me right now" is the antithesis. How can this be done without buying on dips? No one can manually do with any consistency what this system does automatically: Buy more shares on price dips.

Another element in DCA is time horizon. Most financial planners will wisely advise against buying stocks/funds with money that can't be locked up for at least 5 years. So if you're not planning at least 5 years out, you shouldn't be in stocks to begin with, and if you ARE planning at least 5 years out, DCA would optimize the plan.

Going a step beyond that, if you have a 5 year or longer time horizon, it would be wise to change your initial allocation only once a year. Again, the theme is LONG TERM CONSISTENCY. If you have a gob of surplus cash fall out of the sky to invest, preserve it in cash/bonds, then wait and deploy that capital at next years reallocation or maybe even divided per year successively any number of years out. But DO NOT unbalance the plan by dropping a chunk of capital in your funds at once. Let DCA slowly work it into the system.

It's beyond the scope of this article to get into the right time to sell, but DCA can play a valuable role at that time. Not surprisingly, it's best to withdraw as consistently as you deposited. Incorporating that idea into your exit strategy will let the system retain value in your holdings. That's why it's good to know your exit plan when you set up your initial plan from the outset. Plan as far ahead as possible. It never stops working for you!!

Another element in this whole boring machine-like system is fund choice. Pick a good solid fund and stick with it. Any changes beyond your once yearly reallocation will only dilute the effect of DCA. Index Funds are excellent combined with DCA because it adds consistency to a system that's all about consistency.

DCA isn't exciting, and it is a rigid inflexible way to invest, but if you can stay the course, it is clearly an unbeatable strategy. There are a lot of wealthy retired folks out there that got that way by letting this brilliant system take care of their nest egg.

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Simple Mutual Fund Strategy For New Investors

If you are new to investing, you probably want to find a simple, easy to use strategy that will get you started without having to do a lot of research, learn complicated trading methods or start with a lot of money. The good news is that there are plenty of great ways to do this and I will share one here.

Before you get started, you need to understand what a mutual fund is. These popular investments are professionally managed, diversified pools of capital that invest your money based on the individual funds objective. Your dollars are combined with all other investors and the funds management team purchases stocks, bonds or other securities that meet its objective.

You receive shares in the fund and the funds assets are priced every day at the close of market trading. When dividends, interest and capital gains are generated by the fund, they are distributed back to every investor in the fund based on the number of shares that you own.

Your Investment Strategy: Keep it simple. Sometimes the best strategies are also the easiest to understand and implement. Start by selecting ONE high quality, no-load conservative, moderate or world allocation fund. These funds will buy a mixture of stocks, bonds and other securities that will provide a nice diversified portfolio to participate in the equity markets and provide downside risk protection. Many of these can be purchased for $100 to $250 and then you can make additional deposits whenever you chose.

Systematic Investing: If you are going to build your net worth and personal wealth, you should also make an effort to invest on a regular basis. This can be done by using a systematic investing approach that helps you to structure your investments on a quarterly, monthly or even a weekly basis. Try to establish an annual contribution goal and then divide it by your desired time frame. This will help you to structure a plan that will keep your investment program moving forward.

Automatic Accumulation: Your next step should be to find a way to make your systematic investments... automatic. This can be done through a payroll deduction, an automatic electronic transfer, a pre-authorized bank draft or by making a direct deposit manually. If you are serious, you should establish an automatic electronic deposit, because you will not need to take any further action and your investment program will be on auto-pilot.

Asset Allocation Strategy: As a final step, you will need to look at your strategy on a regular basis. I recommend quarterly. As your investments, net worth and personal wealth grow, you should eventually add some additional diversification to your program by adding one or more no-load funds to your portfolio. By adding a great bond fund and some international exposure can help your overall returns. When you add funds, you should also set up an automatic regular investment into each of the new funds as well. This will force you to keep savings and systematically expand your personal wealth.

Summary: Getting started in the investment world doesn't have to be complicated, expensive or take a lot of your valuable time. Just follow this short outline and you will be up and running quickly. Once your program is on auto-pilot, sit back and let it work. You will be pleasantly surprised by your progress when you sit down to review your investments 12 and 24 months from now. Small, simple steps can make a big impact on your bottom line.

To discover additional investment, financial and income tax strategies, check out my blog or download your FREE Wealth Expansion Kit by clicking here. The first step to creating wealth is knowing where you are and then charting a path that will enhance your financial strengths and correct your weaknesses.

About the Author:

Keith Maderer is a financial expert and has been a investment and tax adviser in the Western New York area for over 30 years. He is the owner of SENIOR Financial and Tax Associates and the founder of the Maderer Foundation, a private scholarship program.

Keith is also the author of "How To Get Your College Education For Less". Available on Amazon.com - ISBN No: 978-1-4538-2053-7.

You can get your FREE Wealth Expansion Kit, or check out his blog by visiting http://www.sftaweb.com/