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Understanding Mutual Funds

Are mutual funds the best type of investment?

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David John Marotta
President, Marotta Wealth Management, Inc., Marotta Wealth Management, Inc.
http://www.emarotta.com  
434-244-0000

David John Marotta is the President of Marotta Wealth Management, a fee-only financial planning and asset management firm in Charlottesville, Virginia. He is an oft-quoted writer and speaker on financial matters and his weekly financial column can be found at www.eMarotta.com

Are mutual funds the best type of investment?

 

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Host: Are mutual funds the best type of investments?

David Morotta: If you have very, very small amounts of money to invest, mutual funds are the best way to get started, you can buy them with no transaction fee and they will give you a good rate of return. If you have thousands of dollars to invest, you may want to consider exchange traded funds and if you have millions of dollars to invest, you may want to consider individual stocks.

So, there is a sort of a level and as you go up, the each item requires more things to buy it to diversify and there are increasing transaction costs, but the transaction cost are all set by the fact that you are investing large sums of money. It is better to pay that transaction that small transaction cost and to have a higher expense ratio going forward on your portfolio.

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