Expert: Paul Henneman - 9/1/2003

Question
Hello,
Thank you first of all for taking my question.
I have some money that  I have set aside that I wanted to invest for the long term(10 yrs), in an us stock index fund. I am debating weather or not I should open an account with a no-load family such as Vanguard or simply buy such a no-load index fund through my bank, which I have all my accounts (checking, saving, credit card etc) with.  The reason I have been considering buying mutual funds through my bank's brokerage is  simply because I like to keep things simple and not have accounts scattered here and there.

However, I do not know the pros and cons of this and I'm not sure if I'd be better off investing directly through the mutual fund company. I would like your opinion on this.

Thank you,
atam  

Answer
Thanks for your question!
My specialty is in stocks, but I do have some thoughts for you regarding your mutual fund questions.
There is really no difference that I am aware of between the two ways to invest in a mutual fund that you mention. Purchasing through your bank's brokerage may involve some trading fees, but this is usually not very substantial. I'm with you in that keeping things simple, and easy to read with a as few 'reports' as possible is desirable. You need to be able to get a strong overall view of your investments as time goes on.
My only suggestion would be to not limit yourself to mutual funds. Bonds and stocks should round out your portfolio. Investors often think that by purchasing mutual funds, they are diversified against any big loss. This is usually not the case, most mutual funds specialize in one or a few industries. Mutual funds as a whole have been hit just as hard during the last few years. Go to Yahoo Finance and type in a few ticker symbols of popular mutual funds and you will see what I mean. If your preference is mutual funds, make sure you are invested in a few, each with a different focus. Index funds can be good, as you note.

Please do not hesitate to reply to me directly at paul@valuengine.com if I can be of any additional service!

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