Financial Information

Should You Have Alternative Investments In Your Portfolio?

So you have discovered the merits of dumping your high-priced money manger and his ineffective mutual funds in favor of low-cost index funds allocated across stocks, bonds, and cash. [See top-ranked ETFs …
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CIBC Asset Management adds American Century Investments as Sub-Advisor on CIBC Mutual Funds and Imperial U.S. Equity …

CIBC Asset Management adds American Century Investments as Sub-Advisor on CIBC Mutual Funds and Imperial U.S. Equity Pool
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Delaware Investments Adds Regional Director in Eastern Division

Timothy T. Katusha joins Delaware Investments today as a regional director, servicing financial intermediaries in upstate New York and western Pennsylvania. He is responsible for r
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Guggenheim Investments Expands Offerings on Three Fixed-Income Strategies

NEW YORK — Guggenheim Investments, the investment management division of Guggenheim Partners, announced today the expansion of its fixed-income oriented mutual fund suite with three new strategies previously …
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Thanksgiving’s Over, but These Investments Say ‘Gobble Gobble’

Fairholme and Bank of America are Morningstar.com users’ top turkeys this Thanksgiving.
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First Person: Are Mutual Funds Good Investments?

*Note: This was written by a Yahoo! contributor. Do you have a personal finance story that you’d like to share? Sign up with the Yahoo! Contributor Network to start publishing your own finance articles.

COMMENTARY | Many Wall Street and investment advisory marketing campaigns have tried to force an image of the mutual fund as an ancient relic. Funds were your grandfathers investment; invest in the next generation of funds (or some other slogan that reads along these lines).

Despite the noise, mutual funds continue to be one of the best investment vehicles for individuals. Mutual funds are investment vehicles that allow individuals to pool their funds with others to benefit from professional management, cost efficiencies, and many offer sound strategies to invest for the long run.

Marketing claims against funds

Some claim that the inability to trade mutual funds during trading hours is a negative. Orders for mutual funds are accepted during the day, but they fill at a price that is calculated at day’s end. As an adviser who believes that the reasons for holding a good investment do not change in a matter of hours, I see this rule more often than not as a positive. One rule I try to have is that any change in strategy should only happen after we meet, so that clients do not do more harm to their portfolios by reacting to the market based on emotion alone. In stopping an emotional reaction, mutual fund trading helps clients consider their actions at least for several hours before acting.

Exchange-traded funds market the fact that they allow trading throughout the day as a benefit. However, during the flash crash, many funds traded at significant (over 50%) discounts, and so a seller would receive pennies on the actual value of their investments for wanting to sell out. It may eventually be the case that there is enough demand for exchange-traded funds that their market price reflects the actual value at most times, however during market panics when investors want to sell there isn’t always a buyer at a reasonable price.

A potentially negative characteristic of mutual funds are the fees that they charge for short-term redemptions. These fees are meant to discourage short-term investors, and so they are not much of a concern.

As with any investment plan, you need to consider how mutual funds fit with the other securities in your portfolio. For example, investment types have different settlement dates and so you need to be aware when trading money from a stock to a mutual fund, or from a mutual fund to an exchange-traded fund, when you will be able to reinvest the proceeds from the sale.

Also, the costs of a mutual fund are often difficult to determine. Many expenses do not appear in the funds expense ratio that will have a material impact on a fund. It is generally best to find the fund with the lowest expense ratio that fits your investment objectives.

Despite the marketing claims from advisers and Wall Street, mutual funds are still one of the best options for most investors to build a diversified portfolio and will continue to be.

More from this contributor:

First Person: An Incomplete Retirement Plan

First Person: Every Financial Plan Can Use a Second Opinion

First Person: 3 Risks to Consider Prior to Investing in an Annuity

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