Released with the February 2006 issue of Money Magazine was Money’s Ultimate Mutual Fund Guide of 2006, which is also available online . Included in the Mutual Fund Guide were Exchange Traded Funds (listing also available online ), which aren’t technically mutual funds (since they are traded like stocks instead of bought and sold after market close).
Thoughts on the Actively Managed Funds:
I thought it was interesting that all the top actively-managed funds had expense ratios that topped out at 1.3%, with the majority under 1.0%. Is there any reason to buy into the funds that have a much higher expense ratio? A lot of the active funds also had very reasonable minimum investment required of a thousand dollars or so which make them attractive options for young investors such as myself.
Thoughts on the Index Funds:
They’re all Vanguard or Fidelity funds (Vanguard accounts for nine of the twelve listed!) and the highest expense ratio is 0.5% (Vanguard’s Emerging Market Stock Index fund). Every other fund listed has an expense ratio under under 0.2%. This only cements Vanguard’s place as the premier brokerage of index funds though Fidelity, which has come into the limelight recently, is supporting the expert’s opinion that it’s a great number 2. Right now though, with the explosion of China and other nations, if you really want a mutual fund, the right pick right now is an Emerging Market fund or just playing it “safe” with a fund that mirrors the S&P 500. A very large portion of my 401(k) currently sits in the Emerging Markets fund because it’s had tremendous returns.
After I fund my Roth IRA and pad my emergency fund, I think I’m going to open up a Vanguard account and just put my money into one of their index funds. The returns are very healthy and Vanguard has always had an excellent reputation.