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Old 06-12-2013, 01:13 PM
 
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Quick question. Why would someone invest in mutual funds that hold other mutual funds vs. mutual funds that hold actual common stock?

For example,

The MAAGX has most of its holdings in other mutual funds yet claims to be an agressive growth fund and the MAAGX's #1 holding is the MFS Growth Fund Class R5. Their # 1 holding is Google and they appear to hold actul stocks (97%).

Why would one invest in the first for aggressive growth instead of a variety of the latter's?

I personally prefer index funds and big common stocks (CVX, PG, WMT, BDX, etc.) that you know won't be going anywhere soon and are pillars of their industry, but my wife uses an investment firm and they are trying to put her Roth in some of these mutual funds that hold other mutual funds.

Thoughts? Any upsides to this vs a common-stock mutual fund? Also, we are in our late 20s so plenty of time to take on risk.
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Old 06-12-2013, 01:53 PM
 
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1 stop shopping.

As long as the expenses don't get out of hand it is a good way to own a bunch of diversified funds. Especially if you don't make the fund minimums on their own.

As an example for 2500.00 bucks you can own a mix of funds that you would need 10k just to open an account in all those funds on your own .
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Old 06-12-2013, 02:20 PM
 
4,956 posts, read 5,174,529 times
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Quote:
Originally Posted by mathjak107 View Post
1 stop shopping.

As long as the expenses don't get out of hand it is a good way to own a bunch of diversified funds. Especially if you don't make the fund minimums on their own.

As an example for 2500.00 bucks you can own a mix of funds that you would need 10k just to open an account in all those funds on your own .
So not much different than say owning FSDPX, FSENX, FSUTX, and FSPTX? I guess I feel like because it is essentially pieces of pieces it is a lot safer, but at the same time also a lot less likely to experience large growth.
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Old 06-12-2013, 03:35 PM
 
Location: NE Mississippi
17,801 posts, read 10,472,437 times
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[quote=mizzourah2006;29990658....Thoughts? Any upsides to this vs a common-stock mutual fund? Also, we are in our late 20s so plenty of time to take on risk.[/quote]
The fact that you will be adding money continuously for the next 30 years makes me believe you would be better off with mutual funds because they won't charge you every time you buy. Fund families allow you to shift money, add money, even get out of the market for a while..............I like them.
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Old 06-13-2013, 01:19 PM
 
Location: Central Texas
13,719 posts, read 26,846,955 times
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Quote:
Originally Posted by mizzourah2006 View Post
Quick question. Why would someone invest in mutual funds that hold other mutual funds vs. mutual funds that hold actual common stock?

For example,

The MAAGX has most of its holdings in other mutual funds yet claims to be an agressive growth fund and the MAAGX's #1 holding is the MFS Growth Fund Class R5. Their # 1 holding is Google and they appear to hold actul stocks (97%).

Why would one invest in the first for aggressive growth instead of a variety of the latter's?

I personally prefer index funds and big common stocks (CVX, PG, WMT, BDX, etc.) that you know won't be going anywhere soon and are pillars of their industry, but my wife uses an investment firm and they are trying to put her Roth in some of these mutual funds that hold other mutual funds.

Thoughts? Any upsides to this vs a common-stock mutual fund? Also, we are in our late 20s so plenty of time to take on risk.
There is not one good reason I can think of to invest in a fund like MAAGX. The reason your wife's firm likes it is that it carries a 5.75% load. That is absurd.

Compare to Fidelity's Spartan Extended Market Index Fund (FSEVX).

fund/1 yr/3 yr/5 yr
FSEVX 30.65%/17.11%/7.58%
MAAGX 24.03%/14.01%/4.39%

The supposedly more aggressive fund has worse returns than an index fund that buys from a wide variety of stocks (much broader than the S&P 500).
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Old 06-13-2013, 02:55 PM
 
4,956 posts, read 5,174,529 times
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Quote:
Originally Posted by hoffdano View Post
There is not one good reason I can think of to invest in a fund like MAAGX. The reason your wife's firm likes it is that it carries a 5.75% load. That is absurd.

Compare to Fidelity's Spartan Extended Market Index Fund (FSEVX).

fund/1 yr/3 yr/5 yr
FSEVX 30.65%/17.11%/7.58%
MAAGX 24.03%/14.01%/4.39%

The supposedly more aggressive fund has worse returns than an index fund that buys from a wide variety of stocks (much broader than the S&P 500).
MAAGX does not carry a load on it for her. That was my initial thought as well. She works for the firm, so she gets it load free.

We don't have a ton in their, the thoughts of her investor were that until you get 15-20k in the market its best to leverage large portfolios. She only has about 18k in MAAGX.

Thanks for the info though, I will look more into it, It may make sense to switch to another mutual fund now that we have 18k in MAAGX. I am beginning to do my research on a variety of them. Like I said before I typically stick in good growth/equity stocks and index funds, so mutual funds are a little new to me.
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Old 06-13-2013, 03:02 PM
 
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On another note. I have 20k I am investing in some more traditional stocks, but I want to diversify what are your thoughts on this initial grouping (keep in mind I have another 10-15k in Index Funds) already.

I was thinking

Roughly 4k in each of the following:

DIS
BUD
JNJ

I was also thinking of MCD, or HSBC. Not really in the mood to bet the market on this money, I want solid performers over time.

I already have 3-6k in each of the following: CVX, SPY, KO
and 1k in: BDX, BIK, and AFL

And a couple hundred in some smaller companies.

Given that background which 3 of the 5 mentioned above would you recommend. Also if there is a really good blue chip I am leaving out that you would consider I'd be open to that as well.

Thanks for the guidance everyone.
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Old 06-14-2013, 09:30 AM
 
Location: Central Texas
13,719 posts, read 26,846,955 times
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Quote:
Originally Posted by mizzourah2006 View Post
On another note. I have 20k I am investing in some more traditional stocks, but I want to diversify what are your thoughts on this initial grouping (keep in mind I have another 10-15k in Index Funds) already.

I was thinking

Roughly 4k in each of the following:

DIS
BUD
JNJ

I was also thinking of MCD, or HSBC. Not really in the mood to bet the market on this money, I want solid performers over time.

I already have 3-6k in each of the following: CVX, SPY, KO
and 1k in: BDX, BIK, and AFL

And a couple hundred in some smaller companies.

Given that background which 3 of the 5 mentioned above would you recommend. Also if there is a really good blue chip I am leaving out that you would consider I'd be open to that as well.

Thanks for the guidance everyone.
I am reluctant to offer advice in specific stocks. My general thoughts though are:

- I am reluctant to buy stocks of very mature companies near their 52 wk highs. These companies are typically growing slowly and in absence of a significant product development less likely to move significantly upward.
- these stocks may be good investments on their own and less risky because of their strong revenue base and solid management. These are things for you to evaluate.
- some or all of these stocks are part of the S&P 500. So you probably effectively own them as part of index funds.
- I am not a "big" investor, but am just not very motivated to buy $1K of a stock. It is just too small a buy to be financially interesting to me in absolute terms, even though the percentage gains could be interesting.

For reference, some of the stocks I own:

BRKB (for many years)
ORCL (for many years)
NKE (many years)
AAPL (a few years)
WMT (many years)
GS (two years)
HPQ (two years) <----disappointing

I have been steadily reducing or eliminating my holdings of large tech stocks like CSCO, MSFT, INTC. I am more interested now in "new" stuff - that can grow with emerging trends or technologies. I am watching TSLA, CREE for example. Recently bought some GT because it was low and and is likely to rise with an improving economy, especially for automobiles and construction equipment.

I have an irrational objection to BUD because I think their products are ridiculous and think growth will occur with craft beers, not mass market awful beers. Unfortunately there are few stocks to consider in craft brews except SAM and BREW.
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Old 05-21-2014, 11:00 AM
 
Location: Santa Rosa
486 posts, read 704,573 times
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When I was younger and had more time I used to own dozens of individual stocks and have 10 different types of mutuals funds. This is fine when you have the time to research and rebalance. For most people just picking a fund of funds or a target retirement fund that you can set and forget is the way to go.
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Old 05-21-2014, 12:59 PM
 
18,624 posts, read 10,207,130 times
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Quote:
Originally Posted by mizzourah2006 View Post
Quick question. Why would someone invest in mutual funds that hold other mutual funds vs. mutual funds that hold actual common stock?

Let me give you a reason NOT to invest in mutual funds that invest in other mutual funds.

You probably pay twice the management fees.

You pay a management fee to the person that runs the "primary mutual fund" and chooses what other "secondary mutual funds" to invest in and in what amounts. And then those "secondary mutual funds" charge a management fee for choosing what stocks to invest in.

Your money is almost certainly getting double the fees applied to it whether or not you realize it.
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