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Hold This Book Is Different
Many investment books confuse folks. They present you with some newfangled system that you never figure out how to use without the help of a mainframe computer, several mathematicians, and a Nobel Laureate as your personal consultants. Books that bewilder more than enlighten may be intentional because the author may have another agenda: to get you to turn your money over to him to manage or to sell you his newsletter(s). These writers with an agenda may imply and sometimes say that you really can’t invest well on your own.
Going another route, too many investment books glorify rather than advise. They place on a pedestal the very, very few who, during decidedly brief periods in the history of the world and financial markets, managed to beat the market averages by a few percentage points or so per year. Many of these books and their publishers suggest that reading them will show you the strategies that led Superstar Money Manager to the superlative performance that the book glorifies. “He did it his way; now you can, too,” trumpets the marketing material. Not so. Reading a book about what made
Mutual Funds For Dummies, 2nd Edition
Michael Jordan a phenomenal basketball player, Shakespeare a great playwright, or Henry Kissinger a successful Secretary of State won’t help you shoot a basket, versify, or negotiate stately alliances like these famous folks. By the same token, you can’t discover from a book the way to become the next Wall Street investment wizard. These types of books make their publishers wealthy, not you.
Almost as bad, most mutual fund books are too technical. Those that do a good job explaining the fundamental concepts typically don’t delve into the nuts-and-bolts issues that frustrate some financial novices. Many authors lack a financial planning perspective and an “in the trenches” understanding of the challenges real investors face.
When you want to buy or sell a mutual fund, your decision needs to fit your overall financial objectives and individual situation. Fund investors make many mistakes in this regard. For example, they invest in funds instead of paying off debt or tucking money into their employer’s tax-deductible retirement savings plan. It’s also common for investors to choose funds that don’t fit their tax situation. Mutual Funds For Dummies, 2nd Edition, helps you avoid those common fund-investing pitfalls.
This book also covers pesky issues completely ignored by other mutual fund books. For novice fund investors, simply finding the correct application form in the mountain of literature that fund companies send can be a challenge. And if you invest in mutual funds outside of tax-sheltered retirement accounts, you’re greeted by the inevitable headache from figuring out how to report distributions at tax time. This book puts you on the path you need to be on in order to avoid these problems.
The truth is, investing is not all that difficult — and mutual funds are the great equalizer. There’s absolutely no reason, except perhaps a lack of time and effort on your part, why you can’t successfully invest in mutual funds on your own. In fact, if you understand some basic concepts and find out how to avoid major mistakes that occur for some fairly obvious reasons, you can be even more successful than most so-called investment professionals.
I’ve invested in mutual funds for more than two decades and in my practice as a financial counselor, and in the personal finance courses I teach, I help investors make successful investing decisions with mutual funds as part of comprehensive personal financial management. So I know the questions and challenges that you face when you invest in funds. I wrote this book to answer, in plain English, your fund-investing questions.
Conquering Fund Confusion
You have good reason to be reading this book because mutual funds are a huge and confusing business. Although mutual funds began in the United States in 1924, as recently as 1978 they held only $57 billion in assets.
Today, thousands of mutual funds account for over four trillion dollars ($4,000,000,000,000 — count all those zeros!) under management — a 70-fold increase in just the last 20 years.
Although the basic principle behind mutual funds sounds simple enough — pooled money from thousands of individuals that is invested in stocks, bonds, or other securities — you have to understand the different types of investments, such as stocks and bonds, and the way they work, because funds are a package deal. And that’s where the fun begins.
The second fact you have to understand is that so many individual funds — more than 8,000 — are available. Hundreds of companies in many different kinds of businesses (mutual fund companies, brokerage firms, insurers, banks, and so on) are trying to sell funds. Even experienced investors suffer from information overload. Lucky for you, I present short lists of great funds that work for you and your situation.