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Newsletter

2012 2nd Edition (Other Editions)

FIRST-TIME MUTUAL FUND INVESTORS

ESTABLISH AN INVESTMENT PLAN

What are your financial goals? Investing for a home, college, or retirement require different investment strategies, and thus selections of different types of mutual funds. If you're investing for retirement 30 years from now, you may want to select "riskier" but potentially more rewarding funds than if you're investing to buy a home in two years.

DIVERSIFY

Never put all your investment money into a single fund or single type of mutual fund. By spreading your assets among funds investing in big company stocks, small company stocks, international assets, fixed-income assets, and so on, you can potentially reduce risk. You will also be less likely to panic if one or two of the funds do poorly. By diversifying, you could invest in some riskier funds that have the potential to provide higher long term returns.

BE CAREFUL OF "HOT" FUNDS

Do not pick a fund just because it was last year's high-flying performer. It could be at the bottom of this year's list. Look at its long term track record to see how it performed under various market conditions. Is last year's successful fund manager still there? Pick funds most likely to meet your needs and goals within the limits of your investment plan.

INVEST FOR THE LONG HAUL

Do not try to time the market, bouncing from one fund to another hoping to catch the latest wave. You should stay in a fund at least three to five years.

DOLLAR - COST AVERAGING (DCA)

Consider using the dollar-cost-averaging method of investing. This means putting a net amount each month in mutual funds, regardless of whether the market is up or down. On average, you will buy more shares at lower prices and sell them at higher prices. This is easy to do, since most mutual funds have automatic deposit and usually require only modest minimum investments after opening an account.