Most of my funds are managed by Charles Schwab. However, Fidelity and Vanguard offer very attractive expense ratios.

I keep hearing about Charles Schwab...who is he??

Vanguard has many great mutual funds. These funds have low expenses which are key to a large portion of mutual fund performance. In addition vanguard has many good fund of funds. These are mutual funds composed of other mutual funds that provide greater diversification and simplicity for the investor.

Chrales Schwab is a billionare and he owns a brokerage company named after himself

I don't own any mutual funds. I prefer ETFs. Lower fees, and more flexability...

Yes, Charles Schwab ("Chuck") is indeed a billionaire, but he doesn't own the brokerage company (it is a publicly owned corporation). He still has a significant stock position.

I believe he started the company as an investment newsletter service or something along those lines, and grew from there. The company was bought by Bank of America at one point, but then I believe management bought it back years later.

Charles Schwab was one of the first discount brokerage firms. The have an excellent reputation and are a well run firm. You can do a lot worse than having a brokerage account with them. If I was a consumer and had to choose a firm to do personal brokerage business with, Schwab would be the one.

Chris

To answer the mutual fund question, I personally own 6 funds. Three of which provide me with a diversified stock portfolio encompassing the US stock market, International markets, and the bond market. The remaining three funds are designed to boost returns in specific market cycles.

Because of my licensing, I cannot mention specific investments. The companies mentioned here are all good companies. Personally, I'm not a fan of Fidelity actively managed funds, but their index funds are OK.

Mwgr5,

Low expenses can have a direct effect on mutual fund performance, but it is not as significant as many believe. It is about "net-net" performance. What this means is overall return minus fees/expenses minus taxes. An actively managed fund with high fees can beat a low fee/expense fund, all costs considered. And vice versa.

Bottom line is it doesn't matter whether a mutual fund is no-load, load, an ETF, an index, or whatever. What matters is the economics. The problem the vast majority of financial advisors have is that they have no understanding of any of these concepts, especially macroeconomics. You need to approach investing as a science, using macroeconomics not mathematics.

Here's an example:

You bought the brand new ABC Fund with $10,000.
ABC Fund had a fabulous first year in 2005, and had a 100% return!
In 2006, ABC Fund collapses with the market, losing 50%...

Now, mathematics and "average rate of return" suggests that ABC Fund has had a solid first 2 years, equating to a 25% average annual rate of return (100-50=50 / 2=25). We'd all kill for a fund averaging 25%!

Economics, however, looks at it differently. Economics says you had a 0% rate of return over those 2 years, not 25%. Let's take a look:
$10,000 @ 100% Year 1 = $20,000
$20,000 @ -50% Year 2 = $10,000
You're back where you started!

Had you actually averaged 25% rate of return, as reported on Morningstar, you should have $15,625 after year 2, not $10,000. As always, reality is much different than the numbers/ratios people use to choose their investments. (Btw, anyone who says volatility is a good thing should have their head examined.)

Chris

Personally I don't like mutual funds and prefer the hedge fund approach.

Mutual Funds may be a decent addition to an overall portfolio as part of a long-term strategy but so far I have not met a mutual fund manager who had a good ROI and I don't consider 'beating the market' as a succesful investment strategy and don't qualify a 10% or 15% yearly gain as a good ROI which is why I prefer hedge funds.

It all depends on preference and investment goals.

I also like Vanguard as well as other no load mutual fund companies such as T. Rowe Price, Fidelity, Dodge & Cox, Royce and Metropolitan West. No one mutual fund company is the best at all investment strategies. T. Rowe Price is very good at domestic equity strategies while Royce specializes in smaller cap value investments. For fixed-income, Vanguard, Metropolitan West, Fidelity and T. Rowe Price are all very good.

Some of the factors that I look when evaluating mutual funds are historical mutual fund performance, expenses, consistency and especially the quality of management. I am very selective when it comes to mutual fund manager and analyst backgrounds and experience. You do not necessarily have to pay any more for a highly qualified mutual fund manager, so why not select mutual fund managers with the best credentials.

Michael A. Weiss, CFA
The Editor
The Mutual Fund Investor
http://www.mutualfundinvestor.net

Chris,

Expenses are not the only factor that contributes to performance, but they are certainly important and many studies support this comment. Whether a mutual fund is load or no load does matter, on average. No load funds have lower expenses, and on average, have better performance than load funds.

In additon to expenses, quality of management is also very important.


Michael A. Weiss, CFA
The Editor
The Mutual Fund Investor

Are you referring to passively managed ETFs or actively managed ETFs?


Michael A. Weiss, CFA
The Editor
The Mutual Fund Investor

Fidelity has some good actively managed mutual funds, especially on the municipal fixed income side.

Michael A. Weiss, CFA
The Editor
The Mutual Fund Investor
http://www.mutualfundinvestor.net

My father-in-law always tells me about the Fidelity mutual fund. I might have to look more into it after reading this thread.