How to Become a Millionaire the Easy Way In Mutual Funds

How to Become a Millionaire the Easy Way In Mutual Funds

Here is what I regard as the ideal manner for a shrewd mutual fund investor to plan and invest. Pick a diversified domestic growth fund that performed in the top quartile of all mutual funds over the last three to five years. It will probably have averaged an annual rate of return of about 20%. The fund should also have a better-than-average record in the latest 12 months when compared to other domestic growth stock funds.

The fund can be either a no-load, with no commission, or load, or one where a sales commission is charged. If you buy a fund with a sales charge, discounts are offered according to the amount you invest and some funds have back-end loads which you may want to check.
The commission paid is substantially less than the mark-up you pay to buy insurance, a new car, a suit of clothes, or your groceries. You can also sign a letter of intent, which will allow a lower sales charge to apply to any quantity purchase made over the following 13 months.

When you purchase a mutual fund, you are hiring professional management to make decisions for you in the stock market.

Most diversified funds should be treated differently from individual stocks. A stock may decline and never come back in price. That's why the loss-cutting policy is necessary.

However, a well-selected fund run by an established management organization will, in time, almost always recover from the steep corrections that naturally occur during numerous bear markets. This is because mutual funds are broadly diversified and should participate in each recovery cycle in the American economy.

Therefore, I believe an extraordinarily different strategy should be employed with mutual funds. Each time you get into the thick of an economic recession and the newspapers and TV tell you how terrible things are, why not add to your fund when it is off 25% to 30% from its peak price. It might even be a possible time to borrow a little money and buy more shares. If you are patient, within two or three years the shares should be up sharply in price.

Remember, you're going to hold through many economic cycles, so why not be smart and add to your investment during each bear market? You can also reinvest your dividends and capital gains distributions and benefit from compounding over the years. When you buy your growth mutual fund, you should make up your mind at the outset that you are positively going to sit through the next three or four bear markets or economic recessions. This will give you the maximum opportunity to make really big money.


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