Aggies,

Oldest child recently graduated. Good job, she's maxing out her retirement contributions, and has built up a 5-6 month nest egg. Now she wants to start putting money into Mutual Funds and asked me for advice as to how to do so...

I have a core group of different Mutual Funds that I have been investing in for several years/decades. When researching, I went out to Morningstar and looked at ratings, returns, expenses, value vs growth, big vs small etc. Then I purchased the funds directly through the fund program itself.

Is this still the best way to purchase funds? Morningstar appears to hide much of their data behind a premium subscription service. Are there other fund review sites that anyone can recommend? Any thoughts as to preference of purchasing directly as opposed to purchasing through a brokerage? I know the way that I have done this over the years and I have been largely successful, but I also recognize that there might be better ways than when I first began investing back in the dark ages.

Thanks Ags.

PetroAg, I would focus on the low cost segment if you want to go "do it yourself". I think Vanguard is a good place to start in that arena. If you want some ideas and portfolios that have stood the test of time (and market ups and downs) I would also strongly recommend a subscription to the Independent Advisor for Vanguard Investors. Dan Wiener is the brains behind this and he knows almost everything about the Vanguard fund families. They also run model portfolios from which you can pick and choose (higher risk to lower risk) to run yourself. You just have to rebalance periodically to keep the target allocations proper.

You may also want to check out a group called Asset Bullder. Run by Scott Burns formerly of the Dallas News. Again, low cost investing. They work through Schwab and do the rebalancing for you quarterly.

You would be hard pressed to find any evidence that you should focus on anything other than costs. Keep costs down, active or passive, and your likelihood of having a top performer go up considerably.

Here are a couple of stats to consider. 15 years ago there were 2758 US Equity Funds. Only 470 or so (17%) survived and beat their benchmarks.

Over that same 15 years, 26% of the funds in the lowest quartile of cost beat their benchmarks, while only 7% outperformed from the top quartile.

TLDR - Buy cheap index funds

Thanks, Renegade.

Makes sense. I've always targeted the no load funds, and having her focus on the lower expense index funds is probably a good starting point.

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Aggies,

Oldest child recently graduated. Good job, she's maxing out her retirement contributions, and has built up a 5-6 month nest egg. Now she wants to start putting money into Mutual Funds and asked me for advice as to how to do so...

I have a core group of different Mutual Funds that I have been investing in for several years/decades. When researching, I went out to Morningstar and looked at ratings, returns, expenses, value vs growth, big vs small etc. Then I purchased the funds directly through the fund program itself.

Is this still the best way to purchase funds? Morningstar appears to hide much of their data behind a premium subscription service. Are there other fund review sites that anyone can recommend? Any thoughts as to preference of purchasing directly as opposed to purchasing through a brokerage? I know the way that I have done this over the years and I have been largely successful, but I also recognize that there might be better ways than when I first began investing back in the dark ages.

Thanks Ags.

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If she is maxing out her retirement contributions, I would imagine she is already investing in mutual funds.

If she wants to start investing in a brokerage account, I would echo what others have said regarding Vanguard. If she opens accounts with Vanguard directly she will save money on transaction costs; however, depending on her income level she may be better off opening a ROTH IRA and contributing the first $5,500 in excess savings there rather than in a brokerage account.