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Are you confused on all of the terminology with mutual funds: Class A, Class B, Class C, No Load, etc. I was confused for a long time. For about 10 years I used a Financial Advisor from a large national firm as I thought I couldn’t figure things out on my own. Then a little over two years ago I was laid off from my job. I was off of work for three months. Most of each day I spent looking for a job, sending resumes, etc. But I took time during this period to also do research on investing.  I studied my finance magazines which I had been subscribing to and reading for years.  I searched the web.   I contacted experts in the field. And I must say, one of the greatest benefits of this job layoff was deciding to take control of my own investments. Who is better to make decisions about your money than YOU!!!

I had made the mistake years earlier of selecting a financial advisor from this large national firm who not only made money from me with an annual fee but also from the investments she was selling me. I realized I was in Class B shares of the funds I owned.   I thought my ONLY options were Class A where you pay a sales charge of maybe 4.75% when you buy shares, Class B where you pay a sales charge when you sell if you don’t hold the fund for something usually at least 7 years or Class C where they may charge a sales charge if you sell within a year but also charge higher fees every year. That’s it – I thought the only options out there were A, B or C.   Wrong!   I found I could dump this financial advisor and this national financial firm and go with a discount brokerage and purchase “no-load” funds where you don’t pay a sales charge at all.  None!

I immediately transferred my investment account (which was an accumulation of previous employer’s 401ks in a rollover IRA) to the discount brokerage and purchased no load mutual funds. I had to take a hit on selling some of the Class B funds as I had not had them more than the 7 – 8 years required but they were doing so poorly, had low Morningstar ratings and had high expense ratios. They were also proprietary to this national firm so I couldn’t roll them over. If I wanted to move the money to the discount brokerage, I had to sell them. So sell them I did!

To do my research I studied the Morningstar Investing Classroom on line. I studied Kiplingers, Money and SmartMoney magazines. I researched the Money 70 and the Kiplinger 25 top fund lists. I learned about the difference between growth and value funds and that blend funds have some of each. I learned about the difference between large, mid and small cap which basically means large companies, middle size companies and small companies. Having some of each is part of “diversification.” I learned about expense ratios – the lower the better. I learned about “asset allocation” which basically means a mix of US stocks, foreign stocks, bonds and cash and is based on your risk tolerance and years until retirement. I learned about the Morningstar Style Box and I learned about index funds (which have very low expense ratios).
I found out that investing isn’t “rocket science” and once you know the basic concepts you can make decisions on your own. Realize that if you choose funds with a Cl A, B or C in the name you are probably paying sales charges and/or higher fees. You may even find these in your 401k. If you don’t want to pick several different funds for your diversification and asset allocation then choose one fund that has a year in the name such as 2025, 2030, 2035. You should choose the year closest to the year you plan to retire and the fund will automatically adjust to a higher percentage of bonds/money market as you get closer to retirement.

The key is to develop an investment policy based on your objectives, philosophy, risk tolerance and asset allocation and then stick with it. Rebalance about once a year and hang with the ups and downs. You are in this for the long haul aren’t you?

For more information visit my website www.debtandmoneyinfo.com