Most financial experts emphasize the importance of investing in mutual funds over the long term, arguing that doing so can minimize cost and maximize consistent return.
Investing over the long term allows you to minimize the overall cost of your investment. For example, when you purchase Class A shares, you pay a fee up front that eats into your initial investment and subsequent return. The longer you hold onto these shares, however, the longer you allow the fund's value to grow over time, minimizing the initial effect of the front-end load.
Furthermore, trading frequently can become expensive because you will be paying various sales charges every time you make a purchase. Moreover, if the fund charges early redemption fees, you might incur costs from selling shares too soon.
Long-term investing helps maximize consistent return by sticking with investments even as they experience dips in performance. While one year's top-performing funds may be enticing, the highest performing funds of that year are unlikely to remain the top performers every year. Instead, concentrating on finding funds that perform consistently with the appropriate benchmark year after year can help increase your profit. This is true even if the fund never makes it to the top of the performance charts. Though performance might dip one year, it could produce positive and relatively steady returns over time.
Investors should consider the investment objectives, risks, charges, and expenses of a mutual fund carefully before investing. A prospectus contains this and other information. A mutual fund prospectus is available through www.scottrade.com or through a Scottrade branch office. The prospectus should be read carefully before investing.