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Is There a Best Time for Investing in Mutual Funds?

There are significant advantages in investing in mutual funds.

• Mutual funds are an investing tool to add diversity.
• The advantage of owning one fund that holds several stocks or bonds is that the average investor probably can’t own the number of stocks/bonds in a mutual fund.
• Mutual funds allow a new investor with limited funds to invest in the stock or bond market.
• Mutual funds are an ideal way to invest for your retirement either through a Roth or Traditional IRA since the funds can accept small regular deposits.
• Asset allocation should be of primary importance; avoid putting your investment, especially in retirement plans on autopilot.
• Do not be afraid to exit a mutual fund that is not performing over a long period of time.
  
  

The Bear Trap for investing in Mutual Funds

• Is your plan tax deferred or taxable?
• Mutual funds pay capital gains, generally, but not always, at the end of the year either in November or December.
• Any gain paid will have to be reported on your tax return. Sometimes they are long term, i.e. held for more than a year and sometimes short term which is less than one year.
• Sometimes short term corrections allow you an opportunity to invest in a fund in a tax deferred account; however, if you are investing in a taxable account check with the mutual fund company to avoid paying capital gain taxes.