New Year's Fund Resolutions

by Alan Lavine and Gail Liberman

Here are some year-end mutual fund investment tips to help you ring in a good 2006.

Invest regularly in a well-managed stock fund or index fund for at least 10 years. You need that much time to accumulate shares at a lower cost and profit during rising period of the stock market. Historically, there is one bad year for every three good ones, according to Ibbotson Associates, Chicago.

Keep investment expenses low. Stick with no-load mutual funds with low expense ratios. The average stock fund has an expense ratio of 1.4 percent. But funds, like the Vanguard Index 500 Fund, sport even lower expenses of .2 percent.

Take advantage of break points if you invest in load funds. Invest $50,000 or more, and your front-end commission drops substantially. Or, you can hire a wrap account money manager. The manager pools investors’ money together so you can invest commission-free. But you will pay the manager at least 1 percent annually.

Invest to beat the taxman. High tax bracket investors should stick with tax-free money funds and bond funds.

Keep informed about the economy. Read the daily business news online or in your newspaper. Educate yourself about how investments work. Subscribe to an investment newsletter. Tip: You can write off the cost of the subscription on your income taxes.

Avoid chasing after high yields and hot growth stock funds. You can win a lot, but you can also lose your shirt.

Keep inflation in mind when you invest. Income from bank CDs and bonds is eroded by inflation. So it’s best to invest some of your money in inflation-indexed bond funds, as well as real estate and precious metals mutual funds.

Alan Lavine and Gail Liberman are husband-wife personal finance columnists, journalists and authors. They are the authors of "Rags To Retirement," published by Alpha Books. Their columns appear in newspapers throughout New England and the Southeast, as well as online. Their commentary on mutual funds and personal finance is carried by 200 radio stations nationwide every Sunday over Business News Network's Charles DeRose Financial Advisor Show. Al and Gail’s new book is "Rags To Retirement:  Stories from people who retired well on much less than you think," published by Alpha Books.

More articles by Al and Gail can be found here.