that difference with the Transamerica Premier Cash Reserve Fund (800-892- 7587) at a 5.47% rate.
One final consideration in choosing a money market fund is access to a larger fund family. Vanguard (800-662-2739), Fidelity (800-544-3902) and Strong (800-368-3863) all offer good money market funds, and by tapping into one of the established firms in the business, you can set up a pipeline into their larger variety of funds. This allows you to move money back and forth, a good first step in building your portfolio.
PUTTING YOUR FUNDS ON A SOLID FOUNDATION
Once you’ve set aside your cushion, it’s time to broaden your horizons and take on the stock market. Hakim I. Fajardo, 25, is at that very threshold. Upon graduating from the University of Vermont two years ago, Fajardo landed a job at MSNBC, the online news organization, with a salary in the mid $30s. Having moved back home with his parents in New York City, Fajardo found his bank savings account fattening nicely. He quickly launched into making new plans. An apartment all his own topped the list, but Fajardo kept his head enough to realize that long-term savings are key–especially since he hopes to start a family in the next five to 10 years. That prompted him to dive headlong into investment books of all types, get well grounded in the basics of stocks and mutual funds, and even take an interest in options. What he hasn’t done yet is move his money out of the low-interest savings account and into the market.
“I’m still in the process of deciding what investments are right for me,” says Fajardo. “I’m trying to pace myself as a beginner learning to play basketball; you’ve got to get down the basics before you copy Michael Jordan’s moves.”
Knowing that mutual funds are the best way to begin a budding investment portfolio is one thing, but picking the right fund takes a little work. At its core, selecting a fund is essentially deciding on a fund manager, who acts as a stock picker. Your money is handed over to that portfolio manager, who decides when to buy and when to sell.
With that in mind, the fund manager should have a solid long-term track record of at least three years for that specific fund–and preferably five, so you can see how he or she fared in good years and bad. Morningstar provides a wealth of such material in its publications, many of which are available at the local library.
A major consideration to bear in mind is whether the person at the helm actually beat the market. Remember: index funds that simply buy all the stocks in the S&P 500 or Dow Jones Industrial Average need no management and do reasonably well mimicking the market. A manager worthy of your investment needs to do better than that to earn his or her keep.
You’ll want to examine how the fund is run as well. We suggest you avoid mutual funds that require you to pay load fees either when