Here is a list of three very important things to think about in regard to your current stock market mutual fund holdings.
First, the stock market mutual fund investment management message is always the same. It is always a great day to invest in the stock market. If you have one dollar to invest today, you should be 100% invested, diversified, and balanced on the following morning.
There are 80-100 individual stock positions in the average mutual fund. There is no way on earth that it is always a great time to be invested in that many companies at the same time.
Realize that stock market mutual fund companies are money gathering machines. Their main message is all about sales and marketing. A buy-and-hold investment management strategy makes them the most investment management fees. The same goes for the investment advisors who sell stock market mutual funds.
Second, stock market mutual funds are only as good as the overall stock market environment. Back-tested investment results don’t look so great when the stock market begins to fall.
Stock market mutual funds go in-and-out of favor all the time. So does the overall stock market. It is up to individual investors to know when the stock market risk is more than they are comfortable with their investments.
Your stock mutual fund manager is not going to make any changes when the stock market begins to fall. Those investment management decisions are up to you.
Third, make sure that you know how much it costs you every year to own your stock market mutual funds.
If your stock market mutual fund has gone up in value more than the overall stock market benchmarks, the stock market mutual fund is worth the annual investment management fees that you pay.
Unfortunately not many stock market mutual funds fall into that category every year. I hope that you currently own the handful of mutual funds that are worth paying for.
This blog post is a reminder to find out if you don’t.
Ric Lager
Lager & Company, Inc.
