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My Personal Finance Journey

Personal finance observation, musing and decisions in a journey toward financial independence by 36 with at least $1 million.

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How To Buy Mutual Funds





The best advice I can give on mutual fund investing is to know the style of a mutual fund, and to understand the risks you are taking when you chase the big returns. For example, you can never expect a money market fund to exceed the performance of an emerging market fund, but you will have more peace during the night.

From MarketWatch:

No risk, no reward, as the old saying goes. Maybe you've found an attractive fund with a great multiyear track record. But just how attractive the fund is will be determined by how the manager generated that return. Better to invest with a manager who delivered superior gains with minimal risk.

"The biggest starry-eyed promise that investors get is performance," said Roy Weitz, founder of the fund-watchdog Web site FundAlarm.com. "What investors really want is not just performance, but consistent performance."

In looking for how returns were achieved, check the fund's annualized results for unusual highs and lows. Then compare those figures with its category peers.

"It's a way to avoid buying a hot fund, and to avoid a fund that is exceptionally risky," Weitz added.

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