Mutual funds

I have a tendency to exhaustively research anything I’m planning to buy – even theatrical movies.

My mom had created a mutual fund for me when I was a child, and recently it has come into my head that if I applied the same maniacal precision into investing that I do in picking computer parts, I can’t lose. So I’ve recently got into the game, and I must say, mutual funds are the most difficult purchases I have ever had to decide on.

For starters, there are over 5,000 mutual funds available to the Canadian investor. Plus, one’s portfolio (aka _asset allocation_) must be personally tailored because it depends on his/her current financial status, comfort level and future goals. Information on each fund (called a _prospectus_) can be vague and incomplete. And besides, all the info is historical data – yesterday’s star can easily be tomorrow’s dog.

Add rabid sales people and scammers to the mix and it’s no wonder the markets are so damn confusing.

Some tips I have learned, if you want to sign up with a discount brokerage and start making some money:

# Understand mutual funds are like the moonshot – you’re looking at cashing these babies in 3-5 years from now, or even decades from now.
# Diversify when building a portfolio. Stick some bonds, some equity, and some foreign equity in there. Adjust the percentage of each to taste.
# You gotta be tough. Don’t bail at the first dip in prices. Chances are, if you’re patient, things will come back up.
# Go for no-load funds, because they charge no commission. They are just as good if not better as the front-load/back-load/low-load stuff.
# Don’t just wait around for the lowest price of your chosen fund before buying it. You’ll be waiting forever. Just hold your breath and jump in. Buy in small increments over time – this process, called _dollar-cost averaging_, will even out the bumps and dips for you.

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