the right way to invest blog
So far, the month of October has given back all the gains of the S&P 500 3 months prior. In other words, the price of the S&P 500 Index on July 10th is pretty close to its price today. It’s important to keep in mind that stock markets go up and down quickly; very seldom do we see slow and steady growth or slow and steady declines. What do we do about these quick movements? Stay the course. This might be a bump in the road towards higher stock prices or this might be the beginning of a long road down for stock prices – we just don’t know which one will happen next. We’re not going to know when to get out before sharp declines happen or when to get in before quick rallies happen, so we need to stay invested every day. When we stay invested every day we’ll take part in all of the markets’ upswings and downswings, but we take comfort in knowing we’ll participate in more and larger upswings than downswings, and over time, this will build wealth for us. This is what markets do – sharp movements, and the ones to the downside feel like they hurt more, but keep calm, stay the course and you’ll be well rewarded in the end.
image courtesy of yahoo.com
Here you can view the quarterly report for Q3, 2018, it concludes with a write up called The Total Price of Ownership. Owning shares of a mutual fund come with a cost. Some mutual fund companies charge you a “load” or a commission to purchase or sell their mutual fund, while all mutual funds have operating costs and manager compensation baked into the price of the fund. This baked in cost is known as the expense ratio; an expense ratio of .50% means a cost of $500 (paid by you, the investor) is baked into an investment of $100,000, for example.
Loads are unnecessary and can be easily avoided so we choose to only use mutual funds that are “no-load” funds. Expense ratios can’t be avoided, so we make sure to use mutual funds with smaller expense ratios, because the less you pay to invest the more you make. Keep in mind, as the article points out, expense ratios aren’t the end all be all when making fund selections and they don’t always tell the whole story when it comes to the cost of owning a fund. You can give the article a read for a more detailed dive into the total price of fund ownership.
Michael Pensinger, CFP® is Owner and President of Pensinger Financial, Inc.
He grew up in Park Forest, Illinois and now resides in Lemont, Illinois with his wife, two children, and two dogs. Michael serves as Treasurer on the Lemont Area Chamber of Commerce Board of Directors and he volunteers for the Lemont Open Space Committee. Read More