Now here’s your basic investment guide to saving money when you start investing. There are two primary costs when you invest money in funds: sales charges called LOADS, and yearly expenses. You pay a sales charge when you buy funds through a representative. For example, you write a check out for $10,000 and hand it to your financial planner who works on commission. Then, 5% comes off the top to pay for sales charges; and each year you are invested, expenses are automatically deducted from your investment. These yearly expenses can be 2% or more of the value of your investment.
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Or you can buy NO-LOAD funds directly from some of the biggest and best fund companies in America and pay NO sales charges, with less than 1% a year deducted for management and other expenses. To cut costs even more go with index funds of either the stock or bond variety. Index funds simply track an index of securities, rather than trying to outperform the stock or bond market. Expenses are low because management costs are low; sometimes costing you less than ¼% a year. Plus, index funds have another advantage. You won’t beat the markets, but you shouldn’t under perform them either.
Investing for beginners need not be a game of sink or swim. Call a no-load fund company that deals directly with the public and ask for a free investor starter kit. Then start investing when you feel comfortable, and save cash when you invest money. If you have a limited financial background I suggest you find and read a complete investment guide before you invest.