Expert: Paul Henneman - 3/9/2007

Question
I have discovered a follow up question after all. Say I have decided to invest in VFINX. Where would I go to buy this mutual fund, and will they charge a fee to buy each month?
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The text above is a follow-up to ...

-----Question-----
Hi, I am 21 and will be beginning my career later this year, when I graduate college. I would like to invest $1,000 a month for about 5 years, then buy a house with this savings. The return I would like would be about 10-12%. How and where should I invest this money, and what kind of risk am I taking in losing it?
-----Answer-----
Monika,
  Thank you for your question!
  10-12% is approximately the market average over time. Some years are better, some worse, but your goals are right on par with the overall market averages. This means that you do not need to try to out perform the market, and difficult and time consuming thing to try to do.
   There are what is called "Index Mutual" funds available. These are mutual funds that you can invest in that exactly copy a major market index. The most stable and recognized index is the Standard and Poors 500 (S&P500), so perhaps you should look into an index fund that is based on that. For example, Vanguards fund with the ticker VFINX does this.
   The risk over five years is minimal. You could lose money for a year or two, but the markets always recover, and after five years the only real question will be how much of a profit there will be. For example, the market had a terrible week last week, but it will certainly come back, although no one every really knows exactly how quickly. The key is patience.
   A great book that may help you with your final decision is "Investing for Dummies". While not exactly a flattering title, it does briefly summarize most major forms of investing, including index funds. Spending a few days to read this and get a handle on the basics will serve you (and your money!) well.
   I hope this helps! Please do not hesitate to follow up with me if I can be of any additional service,

Sincerely,
Paul Henneman
President
ValuEngine Inc
www.ValuEngine.com


Answer
Thank you for the follow up question!
You could buy this mutual fund, and most others, at any major online brokerage firm. For example, a few that have low fees are www.foliofn.com and www.scottrade.com.  You can expect to pay perhaps $7 per trade, meaning that is the cost of the transaction each time you buy more shares of the fund. Because of this, many investors will save up a chunk of money, perhaps a few thousand, then place a single larger trade rather than numerous smaller ones. Another problem is that many funds have a minimum trade amount of a few thousand, another reason it may be better to save up a block, then conduct a larger trade less frequently.  Another very popular online brokerage firm to check out is www.Etrade.com
I hope this helps! Please do not hesitate to follow up if I can be of any additional service,

Sincerely,
Paul Henneman
President
ValuEngine Inc
www.ValuEngine.com