What mistakes do people make when investing in mutual funds?

    Published: 06-16-2009
    Views: 9,903
    Financial planner David Marotta describes the basics of a mutual fund including the common mistakes people make when investing in mutual funds.

    David John Marotta

    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

    Host: What mistakes do people make when investing in mutual funds?

    David Marotta: Probably, one of the biggest mistakes that people make is they buy the wrong kind of fund; they, generally will buy a loaded fund from a salesman because the salesmen are the one who are going to find you. If you go out and find the best fund, you will find the no-load funds, but if you wait for some financial professional to come to you, the chances are that you are not going to have a fee-only financial planner, you are going to have a commission-based mutual fund salesman and then you are going to get loaded funds.

    The second mistake that people make is they think that you cannot buy and sell, so they put money into their investments, but they will never bother to rebalance their investments. And you need to rebalance your investments, constantly, at least once a year, in order to get the best returns and the lowest volatility. So, just the fact that you rebalance every year will end up boosting the returns and lowering your volatility.