AboutDr. Joseph de Beauchamp Expertise Over the decades, I have taught the MBA schools in this subject. I have published on over 2000 public companies. I love to help provide information to the individual and company.
I'm a 26 year old male with an annual income of $60,000. I'm interested in investing in mutual funds but don't really know where to begin. I tried to absorb as much as I could from Morningstar but I got a bit overwhelmed. Four questions:
1) What's the difference between small cap, mid cap, and large cap funds?
2) What's the difference between value, blend, and growth funds?
3) What are ETFs?
4) What does it mean to "diversify" my portfolio, i.e., does it simply mean to pick funds from each category?
Also, if you could recommend an easy-to-understand website or book I could research to further advance my knowledge of investments, I would really appreciate your suggestions.
Thanks a million!!!
Answer L,
1. Difference of these terms can vary, but generally they mean that the mutual fund will buy larger or smaller market capitalization --share price times outstanding is less than 200 million, then you might be talking about a small capital fund.
2. blend puts bonds and stocks into the fund, value is looking at the fundamentals of the company and buying at book value, and growth fund usually by smaller high growth companies.
3. ETFs --new one on me
4. I think one general mutual fund is enough. Pick a large one with plenty of sectors and stocks in it. This will be enough to diversify.
Morningstar is the best source. You might look over the mutual fund section of Barron's magazine, and this is free in the local library. http://wfnn.info has limited information on the mutual fund section of its site. You might find related books on John Templeton, the Templeton mutual funds. He trained me far back in the early 70's and is well known. He sold out to the Franklin Group, and going to http://www.hoovers.com you can look up much information on the Franklin Group, and even order up some of their 500 mutual fund prospecti and read this information.
I would also suggest looking into the managers of the fund, such as education and experience. I would take a long look in this area to further consider, which fund to choose.
