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Research Mutual Funds Before You Invest
I received some inheritance money that I'd like to invest for retirement. I plan to open a mutual fund account with Vanguard and begin investing in index funds. Should I invest the entire lump sum at once or keep it in a high-yield money market account and fund the mutual fund account monthly to take advantage of dollar-cost averaging?
Assume I have no bad debt, have already established an emergency fund, am contributing to a 401(k), and am funding a Roth IRA (also with Vanguard) to the annual max.
Hello,
There is no one correct answer to this question, as it depends on your approach to investing, your current view of the market and your risk tolerance. Lump sum investing might appropriate for one investor while dollar cost averaging might be better for other investors. Dollar cost averaging is probably most appropriate for less experienced investors that have a lower risk tolerance. Lump sum investing best suited to long-term investors with a higher risk tolerance
I hope this helps.
Michael A. Weiss, CFA
The Editor
The Mutual Fund Investor
http://www.mutualfundinvestor.net
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Mutual funds, high yield savings, 401k, roth IRA, CD, stocks, bonds?
With that short of a timeframe, I wouldn't recommend stocks. There is a good chance that you will lose money.
Retirement funds like IRAs and 401ks are out – when you grab your money in a year, you will be slapped with a 10% tax penalty. Ouch. Those are for long-term retirement.
I would recommend money market funds or CDs. Right now, these are paying in the 5-6% per year range.
–>Adam
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I am looking to invest in a mutual fund. Do you now any mutual funds with consistent high yields?
Check out Vanguard.com they are by far the lowest in charging fees for mutual funds and are very well known. They will also be able to answer all your mutual fund questions.
Stay away from any load funds and also for a beginner just stick with a simple index fund that is passively managed and just follows an index as opposed to an actively managed fund that will be more expensive.
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