Alvin D. Hall - Getting Started in Mutual Funds

Getting Started in
MUTUAL
FUNDS
SECOND EDITION

Books in the Getting Started In Series

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Getting Started in Online Investing by David L. Brown and Kassandra Bentley

Getting Started in Investment Clubs by Marsha Bertrand

Getting Started in Internet Auctions by Alan Elliott

Getting Started in Stocks, Third Edition by Alvin D. Hall

Getting Started in Mutual Funds by Alvin D. Hall

Getting Started in Estate Planning by Kerry Hannon

Getting Started in Online Personal Finance by Brad Hill

Getting Started in 401(k) Investing by Paul Katzeff

Getting Started in Internet Investing by Paul Katzeff

Getting Started in Security Analysis by Peter J. Klein

Getting Started in Global Investing by Robert P. Kreitler

Getting Started in Futures, Fifth Edition by Todd Lofton

Getting Started in Financial Information by Daniel Moreau and Tracey Longo

Getting Started in Emerging Markets by Christopher Poillon

Getting Started in Technical Analysis by Jack D. Schwager

Getting Started in Real Estate Investing by Michael C. Thomsett and Jean Freestone

Getting Started in Tax-Savvy Investing by Andrew Westham and Don Korn

Getting Started in Annuities by Gordon M. Williamson

Getting Started in Bonds, Second Edition by Sharon Saltzgiver Wright

Getting Started in Retirement Planning by Ronald M. Yolles and Murray Yolles

Getting Started in Online Brokers by Kristine DeForge

Getting Started in Project Management by Paula Martin and Karen Tate

Getting Started in Six Sigma by Michael C. Thomsett

Getting Started in Rental Income by Michael C. Thomsett

Getting Started in REITs by Richard Imperiale

Getting Started in Property Flipping by Michael C. Thomsett

Getting Started in Fundamental Analysis by Michael C. Thomsett

Getting Started in Chart Patterns by Thomas N. Bulkowski

Getting Started in ETFs by Todd K. Lofton

Getting Started in Swing Trading by Michael C. Thomsett

Getting Started in Options, Seventh Edition by Michael C. Thomsett

Getting Started in A Financially Secure Retirement by Henry Hebeler

Getting Started in Candlestick Charting by Tina Logan

Getting Started in Forex Trading Strategies by Michael D. Archer

Getting Started in Value Investing by Charles Mizrahi

Getting Started in Currency Trading, Second Edition by Michael D. Archer

Getting Started in Options , Eighth Edition by Michael C. Thomsett

Getting Started in Rebuilding Your 401(k), Second Edition by Paul Katzeff

Getting Started in Mutual Funds, Second Edition by Alvin D. Hall

Getting Started in Hedge Funds, Third Edition by Daniel A. Strachman

Copyright 2011 by Alvin D. Hall. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

Hall, Alvin D.
Getting started in mutual funds / Alvin D. Hall. 2nd ed.
p. cm. (Getting started in.. ; 84)
Includes index.
ISBN 978-0-470-52114-4 (pbk.)
1. Mutual funds. 2. Investments. 3. Mutual funds United States. 4. Investments United States. I. Title.
HG4530.H335 2010
332.6327dc22
2010023266

To John Keefe (Chicago, Illinois), who shares my belief that mutual funds are one of the best ways for individuals to learn about the benefits of long-term investing and wealth building

Acknowledgments

Thanks to Van Morrow of Type-Right, Inc., for diligently and expertly turning my drawings into the illustrations and tables in this book, and for helping me to prepare the manuscript during the time when I was simultaneously traveling (literally around the world) for business and writing this edition. Thanks to my long-time friend, Edward Fleur, for helping me to decipher some of the new mutual fund regulations and practices so that I could explain them clearly in this book. John Keefes commitment to reading and commenting on the final manuscript and page proofs was invaluable. His questions and insights helped me to make the book more informative and appropriate to the needs of a wide range of mutual fund investors.

My thanks also go to Bill Falloon, Tiffany Charbonier, and Michael Lisk at John Wiley & Sons. They were forthright, patient, and honest throughout the process of this revision. I truly appreciated their understanding of and dedication to my (and any authors) desire to produce the best book possible. Their work throughout was supportive and encouraging in all the right and honorable ways.

And finally, my thanks to all of the inquisitive people who have attended my lectures and classes over my more than 25 years of conducting training programs in the financial services industry. All of the questions they have asked, especially those that were complex or difficult to answer, have enabled me to improve continually the way I present the information in my classes and in the books I write. I know that the readers of my books are the true beneficiaries of all the wisdom and practical insights Ive learned from teaching financial information in front of real people in classes all over the world.

Introduction

I am writing this second edition of Getting Started in Mutual Funds during a worldwide recession and one of the worst bear markets in recent U.S. history. Many of the funds in which weyou and Iinvested the money we earned or inherited, set aside for our retirement or our childrens education, or saved hoping to fulfill some lifelong dream, are down in value 25, 35, even 50 percent. Trillions of dollars have disappeared from our collective personal net worth. Many investors have decided they cannot stand to see their life savings being slowly wiped out, so they have sold their mutual funds and other investments, putting the proceeds in money market funds. Others are holding on, feeling its too late to sell and take their losses. Instead they hold on to the traditional long-term investment philosophy that the market and the value of their mutual funds will eventually recoveror so they hope and pray.