Stock funds are the most popular of all mutual funds with investors. This is where most average investors make their biggest profits or take their largest losses. Since mutual funds are long-term investments rather than short-term trading vehicles, finding the best stock fund to buy and hold is important to folks looking for long term growth.
The best stock fund is a consistent performer, rather than last year’s top performance fund based on total return. Last year’s top performer is likely a fund that took excessive risks and/or specialized in a volatile stock sector. Rarely does such a fund have a repeat performance.
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The average investor needs a stock fund that tracks the stock market consistently, and rarely if ever underperforms the market in general. The cost of buying and holding the ideal or best stock fund should be low, since sales charges and high yearly expenses eat away at your profits and magnify losses.
Does a mutual fund exist that meets the criterion of our last paragraph? You bet it does, and it’s called a NO-LOAD S&P 500 INDEX FUND. If you invest in just one stock fund, I suggest that you pick one of these.
These funds simply track the S&P 500 Index. Hence, when you own shares in one of these index funds you are invested in 500 major U.S. stocks. These funds are designed to mirror the performance of the stock market.
How do professional investors measure stock market performance in general? They follow the S&P 500 Index. If this index is up 15% for the year, for example, then the stock market is up 15%.
Now let’s talk about the cost of buying and holding stock funds (also called EQUITY funds). Many equity funds have a sales charge (called a LOAD) of 5% or more. For example, if you invest $ 10,000 in a front-end load stock fund, $ 500 goes to pay for sales charges. Many folks buy these funds from investment representatives simply because they do not know how to invest on their own.
If you want to invest in an S&P 500 Index fund, you don’t need the help of an investment professional. Instead, call a major NO-LOAD fund company and invest for a total cost of ZERO. No-load means no sales charges.
All mutual funds deduct yearly expenses from your investment account, but some charge much more than others. For example, you could pay 2% a year just to hold an equity fund if you don’t know how to invest. On the other hand, the total yearly expenses for an S&P 500 Index fund of the no-load variety can amount to as little as ¼ of 1%.
If you want to participate in the stock market and save on the cost of investing look no further than the stock fund that consistently keeps up with the market… a no-load S&P 500 Index fund.
A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.
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