A Beginner's Guide to Investing in mutual funds

info · Joined: 07 Feb 2005 Posts: 23

How much to invest?
Your investment strategy will depend partly on how much money you want to put to work. A few options:
$50 a month or more, with no lump sum. It may not seem like a lot, but even small regular investments in mutual funds or exchange-traded funds can add up.

A lump sum of less than $10,000
You have more options in this range, as many mutual funds have minimum-investment requirements of $500 to $2,500. The key is to make sure all your eggs don't end up in one basket. Invest in five or six different types of mutual funds. If U.S. stocks aren't doing great, your holdings in international stocks or real estate may help keep your overall portfolio afloat.

A lump sum of $10,000 or more
The trick here is not to jump into the market all at once, potentially putting all your money in just before stock prices tumble. One approach: Put one-twelfth of your money into the market each month for a year, a technique known as dollar-cost averaging.

The one-fund option
For some, one mutual fund is plenty to get started as an investor. This is the best option if you haven't got a lump sum to invest. Rather than spend your time cobbling together a full-blown investment portfolio, let a mutual fund company do the work for you. A number of fund companies offer one-fund solutions, which themselves own other mutual funds.

Build a portfolio
Choose five mutual funds that will cover all your investing bases.
By investing in different size companies, various sectors of the economy, and other parts of the world, you reduce the chance that problems in any one area will sink your investing goals.