2. Buying mutual funds

1. In mutual fund [MF] business, many growth funds offered 12% compounded returns for the last 10 years. However individual investors forgot that during recession, those funds could plunge 10%, 30% or more. Thus there was no safe MF on earth.

-> Using diversification strategy worked in this case: [age]% of your portfolio in bond/fixed income funds, the remaining % of your portfolio in equity funds. Rebalance your portfolio from time to time. During recession your bond funds went up & equity funds down. Move money in bonds to equity and wait for economy pick up again. At this time move money from equity funds to bond funds to keep the portfolio ratio as before.

2. Some MF offered reserve capital [no loss on capital] had a couple of percent annual returns.

3. GIC offered only 1% or 2% a year.

4. I've noticed that aggressive growth funds have poorly performed as compared to other funds.

5. To Canadians, we're living in Canada, thus buying Canadian companies issuing CAD dividends worked, because we're using CAD. Having USD dividends were good for further investment. However converting CAD to USD or vice-versa costs money.

6. Stay away from momentum funds, which usually involved in high speculation or hype stocks. For highly speculated stocks, they have added premium to the price, e.g. 10% or 20% over value of the company. If the company did fine, it would go up a little more. However, if bad news came, they would dump its stocks 10% or more within a day.

7. Stock "index" owner selected stocks to include in the index as S&P 500. ETF owner selected stocks to include in the ETF. Mutual fund managers selected stocks, ETF, or indexes to include in a fund. Which one is better? I don't know. Mutual fund managers could actively be buy/sell stocks, but ETF and stock indexes were rarely changed.

-> Mr. Warren Buffet [top investor] recommended to buy S&P 500 index as it mimics US economy, i.e. US economy was doing well, then so the index.

-> I didn't like to buy anything stock index or ETF near 52-week high or at its peak.

8. Window dressing by MF managers. Near the end of a quarter or financial report, MF managers dumped losers and purchased high flying stocks to make their fund looked good, i.e. buying stocks at high prices for their investor. MF reports should show when they've bought those shares.

9. How to select a MF to buy? I didn't look for fund manager names, but historical records. Managers came and left often. Take a look at a maximum time frame to see how they've performed each year before and after recession or a trouble period, and its average compounded return.

10. Be careful with financial advisors as some of them offered advice for buy/sell a fund based on commission received by MF managers.