Page 531 - How to Make Money in Stocks Trilogy

400 INVESTING LIKE A PROFESSIONAL

professional to do. Also, the institutional commission rates that funds pay
are extremely low—only a few cents per share of stock bought or sold. So
don’t be overly concerned about turnover rates. It’s the fund’s overall per-
formance over several years that is key.

The Five Most Common Mistakes Mutual Fund Investors Make

1. Failing to sit tight for at least 15 years or more
2. Worrying about a fund’s management fee, its turnover rate, or the divi-
dends it pays or buying new funds or last year’s #1 fund
3. Being affected by news in the market when you’re supposed to be invest-
ing for the long term
4. Selling out during bad markets or switching funds too often
5. Being impatient and losing confidence too soon

Other Common Mistakes

Typical investors in mutual funds tend to buy the best-performing fund
after it’s had a big year. What they don’t realize is that history virtually dic-
tates that in the next year or two, that fund will probably show much slower
results. If the economy goes into a recession, the results could be poorer
still. Such conditions are usually enough to scare off those with less convic-
tion and those who want to get rich quick.
Some investors switch (usually at the wrong time) to another fund that
someone convinces them is much safer or that has a “hotter” recent perfor-
mance record. Switching may be OK if you have a really bad fund or if
you’re in the wrong type of fund, but too much switching quickly destroys
what must be a long-term commitment to the benefits of compounding.
America’s long-term future has always been a shrewd investment. The
U.S. stock market has been growing since 1790, and the country will con-
tinue to grow in the future, in spite of wars, panics, and deep recessions.
Investing in mutual funds—the right way—is one way to benefit from
America’s growth and to secure your and your family’s long-term, 20-plus-
year financial future.

How to Use IBD to Buy ETFs

To be perfectly honest, I’m not a big fan of exchange-traded funds because
I think you can make more money by focusing on the market leaders. But
because ETFs had become so wildly popular with not only individual