acadia2271:

I am now in a position where I can start investing in mutual funds.  I have a small sum of money to get started (about $10,000 +/-) and the ability to make bi-weekly contributions of $200-$300.  I already make a substantial contirbution bi-weekly to my 401K so I am covered there.  But how do I go about finding which mutual fund to invest in and how do I get signed up.  As you can see I am a real neophyte.

 

First question: what are you investing for?

If you are investing for retirement, I would suggest you consider contributing to an investment inside an IRA in addition to your 401k contribution. Depending on your 401k plan (employer matching rules and investment options), an IRA could be even better by allowing you to invest in things beyond the limited employer plan menu.

If you are investing for a nearer term objective such as a future house or car purchase, then you will probably want to limit exposure to stock funds which are more unpredictable over the short term and can even lose money. If you are investing for longer term objectives than you may want to take on this risk in exchange for the traditionally greater long term returns of funds holding stocks. Balanced funds and many funds-of-funds such as target date funds invest in a combination of stocks and bonds to reduce this risk.

second question: how to buy? 

As for as buying a fund, the easiest way to is pick one of the major no-load fund families which are generally well regarded such as T. Rowe Price, Fidelity, or the very low cost Vanguard and buy one or more of their funds directly. An alternative is to open a brokerage account which will offer up a menu of funds from various fund families but will probably add another layer of expenses.

Another alternative is to go with a financial advisor who will most likely put you in load funds that pay him some of your money in commissions ostensibly in exchange for his ongoing financial guidance. In some cases the funds they will recommend are those that pay them the highest commissions and not necessarily the best ones for you.

Another Rick