Is it Time to Forget About Funds?

in Fund

At, we prefer the direct method of individual stock trading and ownership. But millions of Americans don't want to be bothered with controlling their own money, so they turn it over to a mutual fund manager to make financial decisions before them.

Fund companies spend millions of dollars on attractive marketing to ensure that their prospective look profitable. And funds are a great choice if you want minimal interactivity with your investments. Basically, you spread your investment dollars across several sectors, and the fund managers do the investing for you. They combine your assets with other members of the fund and report a return on your investment over a period of time. Simple right?

Except Funds are not immune to the market, and so by giving up control you are giving up profit, and worse, you could be losing money. Long term fund assets plunged by 34-37% since October 2007. So for every dollar you are investing, you are losing .34 cents. For every percentage point of profit you earned up to that point you have been giving it back. Worse, not only is the fund value declining, but fees for fund maintenance are rising. So why would you give away .45 of every dollar you are investing in the hopes that the fund manager can turn it around and make up for all of that lost ground?

Wouldn't it make more sense to create your own investing plan that includes five to ten solid stocks that are companies you use every day and invest long term with them? Or even better, how about a serious consideration for day trading. What if you could trade one day per week, for fifty weeks per year, and increase your portfolio by an average of 10-12% per year? Is it easy? No. But it's simple.

Ask yourself these questions: Do I check my e-mail at least once every other day? Do I watch, listen or read the news on a daily or every other daily basis? Can I spend four hours to get a basic education on stock trading? Can I spend an hour or two learning about automated trading tools available to me on my computer?

If you can answer yes to those questions, then you have the tools to become a successful day trader for at least one day per week, and with a solid investing plan you can earn more than your fund.

So how do you get started? First, think about the kind of investor you want to be. Set aside one day to execute your investment strategy. What is your work schedule like? If Tuesdays are light days at work, that would be a good day for you to trade. Conversely, if you are swamped during the day, but have time at night, consider after hours trading (which is riskier). Pick the day you want to trade, and then research how that day has performed in the past.

The great thing about the internet is the amount of valuable information you can find in a relatively short period of time. For example, you can go back and look at how a stock has performed on certain days of the week for a quarter. So set aside your trading day, and write out your trading plan.

It should read, "I will schedule my trade activity to occur every Tuesday from 9am - close of bell. I will follow the market on my lunch breaks, with alerts set to e-mail me for any breaking news."

Next, pick your stock. We advocate using companies that you use. Wal Mart, Target,,, Exxon, GE. What products do you have in your cabinet or your fridge that you can buy stock in that company? What businesses do you frequent on a daily or weekly basis. These are great places to put your money, since you are investing where you spend. Unless you are visiting fringe stores, and buy products no one else buys, in which case you need to study mass consumer culture and buy companies where everyone else shops.

Once you select your stock, gather news about it and determine a direction it's going to take. Stock advice from a site, like ours is a great resource to keep up with market news, but also check out RSS feeds about your company and the market. Then set your purchase order with stops and loss limits for insurance.

Your plan should be to make profit, but every trade may not be profitable. An interesting concept that most fund managers talk about is "dollar cost averaging" which means that you invest no matter what, and it all averages out over a period of time. DCA is a bunch of crap, and numerous studies have been conducted to prove it, but the marketing companies that promote funds sell it to nervous investors. Here's the real deal for your investment strategy. You will make profit. You will lose some money. You want to make more money than you lose. Follow the simple steps outlined above and remain involved in your own financial destiny and you will make more money than you lose.

Here's why: we tend to learn more as we go along. It's the practice makes perfect school of wisdom. The more you do it, the better you get. It's the way our brains are designed. Tiger Woods did not come into this world with a 3 iron in his grip, contrary to popular belief. He practiced, over and over again until he got better. Stock trading is like that. You will come to recognize the cycles in the market, and may even go from a once a week day trader to a once a day trader, since automation makes it so simple and profitable. The key is research and visiting valuable resources like for the information you need to keep making money.

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Jacob Lindahl has 1 articles online

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Is it Time to Forget About Funds?

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This article was published on 2010/04/02