You should regularly read or view financial articles authored by pundits in order to learn current market jargon inner and outer workings of saving and investment vehicles. Diligent study helps you find vehicles right for your financial portfolio and others to avoid because they are too complicated or do not have a consistently positive growth history that fits your risk-taking tolerance and short and long-term goals.
In many instances, no-load index mutual funds (total stock market, S&P 500, and similar mixes) with expense ratios less than one percent are best for beginning investors. They can provide the stock allocation of your overall portfolio that you need to supply greater long-term growth. This is better than trying to select individual stocks when you have no expertise in stock picking because the funds offer automatic diversification due to the large number of companies they invest in and will over time garner you the average returns of the stock market when held for twenty years or more, which have been substantial.
A no-load fund (one that lets you invest without paying a sales commission to a broker) with an expense ratio less than 1% is generally a better choice than choosing one that requires you to pay sales commission up-front or at the time you withdraw your money. Several reasons for this are:
1) You start out with the total amount of money you invested working for you instead of only the amount left after expenses have been subtracted. Many people wonder why their portfolios have not grown, yet they keep going to advisors that put money into investments where only 93 to 95% of the investment amount is actually invested after the advisor is paid commission. How would you like to lose $70 out of every $1,000 you invest and thus have only $930 working on your behalf?
2) You pay no surrender penalties to the fund operators for withdrawing funds. Of course, if you invested through a pre-tax retirement plan you might have to pay the federal government taxes for early withdrawal and penalty if you’re younger than 59½ when funds are withdrawn.
3) When you withdraw funds, you do not pay back-end sales commission to an advisor, saving you 5 to 7% of the value of your portfolio and you pay an expense ratio that is usually far less than you would pay on loaded funds.
Review the historical track record of no-load index funds compared to the market benchmark. Choose the funds that historically meet or exceed the industry annual growth average. Over a long investment horizon you come out far ahead of the amount of money you actually invested and well ahead of the returns of loaded, actively managed funds. Steady plodding will bring great success, while get rich quick schemes will bring penury.
One of the great deceptions of our day is that people will get-rich-quick by taking overly aggressive investment risk. Scripture warns against this mentality and less than 1% of those who try actually come into riches using such methods. It is simply not worth putting your family and your god-given purpose in jeopardy.
On another note, the vast majority of people never take actions necessary to grow the money entrusted to them in order to help further the gospel and fulfill their god-given purpose. Let investments in no-load mutual funds with low expense ratios help you in this regard while you study to find out and understand the other types of investments that may help you grow even more.
Please pray for this ministry and email any questions. May God bless you richly as you follow His plan!!!
Proverbs 13:20, Proverbs 19:20-21, Proverbs 21:5, Matthew 25:13-27, Luke 14:28-30
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You can find books authored by Randy and Karen Parlor at www.Amazon.com.
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