|1.||Know what you're investing for.|
|2.||Make paying yourself a priority.|
|3.||Make tax-smart investments.|
|4.||Diversify your portfolio.|
|5.||Choose good investments.|
|>||Individual securities or mutual funds?|
|>||Index funds versus actively managed funds|
|>||Mutual fund expenses|
|>||Relationship between expenses and returns|
|>||Selecting a financial services company|
Load versus no-load1 mutual funds.
These loads are intended to compensate the advisor who sold you the fund for his or her guidance. If you are comfortable selecting your own funds, on the other hand, no-load funds have no sales charges, allowing you to keep more of your investment.
Consider the impact of loads in the chart at right, comparing two investments with identical average annual total returns of 7% before sales charges. Fund B is even managed by the same management team and holds the exact same securities as Fund A. However, because Fund B is sold through a financial advisor, a 5.75% load is charged to the investor, substantially lowering the earnings after one year. The impact of this frontend load can be lessened by holding the investment over an extended period of time.
Understanding other fees and expenses.The following fees make up a fund's expense ratio: