I’m down with the flu this week, which means I’m taking it easy – but not too easy. I’m catching up on some reading and found some nuggets of knowledge regarding mutual funds that you may not already know about and you may enjoy reading. So, without further ado (because I need to get to bed now), the blogs:

First up, from  The Oblivious Investor, comes
11 Tips for Selecting Mutual Funds. This short, concise list of things that matter (and why they matter) when picking a mutual fund will ensure you get in the right frame of mind, before you do anything rash and costly.

Next, the Amateur Asset Allocator has a great primer on the various Types Of Mutual Funds that will help sort out the differences between open-ended, closed-ended, indexed vs. actively managed and more.

And lastly, while we’re on the subject of index funds, Retirement Savior reminds us that some mutual funds do outperform indexes, and tells us when (and why) When NOT to Use Index Funds.

• Tips on Speculating in the Stock Market. I usually feel more in line with value investor Ben Graham's line of thinking, but after reading Jim Cramer's Real Money, I have come to see that there is a time and place for some of the speculator's techniques. Just because favor one school of thought, doesn't mean another doesn't......
• Mutual Fund Monday: PIMCO Launching New Global Fund. According to a recent Edgar filing , PIMCO will soon be launching a new fund: PIMCO Global Opportunities Fund . It's going to be a global value fund of common and preferred stock. The fund will target equities in one of 3 countries, one of which may be the U.S........
• A Possible Change to Mutual Fund Tax Implications on Capital Gains. Investors in U.S. mutual funds might want to keep an eye on this. The Committee on Capital Market Regulation (CCMR) has recently issued a report by Harvard professor John C. Coates which recommends that mutual fund regulators eliminate the requirement for yearly capital gains distributions. The change would only affect......
• Mutual Fund Monday - What 2009 Trends Mean for 2010. Many investors take the change in calendar year as an opportunity to assess their portfolios and the future, and hopefully get their portfolios aligned with the future direction of the stock market. One way in which to do this is to look back on the year that's passed and see......
• Mutual Fund Monday: The Biggest Lies Mutual Fund Companies Tell. Chuck Jaffe at MarketWatch has a great piece that I thought I'd share for my (semi) weekly Mutual Fund Monday post this week. His article lists 7 ways that fund companies manipulate their stats to trick investors. It's all quite legal, since much of it depends on your the viewpoint......

• Why Index Funds are Bad Investments The entire personal finance blogosphere is in love with index funds, and I'm here to tell you why they're bad for your investment portfolio. This should go over well.  Black sheep anyone? I realize this thesis will not be a popular one, but from my perspective as an active investor......
• Mutual Funds - An Investment Vehicle For Small Investors Human beings from their very inception want to earn and save something for unwanted situations. In earlier stage he puts his earnings under the soil to keep it safe from being stolen. Later banking system was developed and subsequently different kind of instruments for investment is being used. Nowadays,......
• Mutual Funds 101 One way that investors can pool their money is mutual funds, which allows them to invest together in a variety of different stocks. Each of the participating investors is charged a percentage fee based on what they invest so that the professional fund manager can receive payment for his work......
• Should Mutual Funds Be Moving Into Cash? Mutual funds are the best investment vehicle for people like you and me.  If you read any finance blogs, you're likely invested in them yourself (good job).  I've talked about them before in the College of Weakonomics series, so if you're a regular reader you should be good to go.......
• Debunking Mutual Fund Naysayers Mutual funds have consistently offered great returns over the long periods of time for several decades now. They take away the risk of investing in single stocks and are a great way to have a diversified portfolio and still make average rates of returns from 12-18%. There are still some......

Target-date funds were supposed to be the ultimate idiot-proof investment vehicle for retirement savings.

The idea is that asset allocation is the single most important factor in determining investing success, and most people get it wrong. Many others never even try because they find the concept too daunting.

Many people know they should save for retirement, but they don’t want to be investors – they don’t know whether they should invest in stocks, bonds, or mutual funds. Enter target-date funds.

Target-date funds are supposed to take all that complexity out of saving for retirement. You simply choose the target date of your retirement, and the investment firm does the rest. It’s like auto pilot, with the fund manager gradually shifting more of your assets to bonds as your retirement date gets nearer, thus reducing the volatility and preserving the value…. in theory.

What happens when theory meets reality is a different story.

As a recent article from USNews points out:

“Many target-date fund investors, including those near retirement age, recently suffered large losses. Long-term investors with a retirement date between 2050 and 2055 had a median return of negative 47.5 percent between October 2007 and February 2009, according to a recent Watson Wyatt analysis of 72 target-date funds.”

No big deal, right? I mean 2050 is a long way off, and those investors should expect some volatility in order to earn more overall. Fine. But here’s where it breaks down:

“Those on the verge of retirement didn’t fare that much better. Investors interested in retiring in 2010 had a median return of negative 31.9 percent. But losses varied considerably among funds because of the large differences in stock market exposure. Funds with a target date between 2050 and 2055 were invested between 51 percent to 95 percent in equities, Watson Wyatt found. Those with a retirement date of 2010 had between 32 and 80 percent of the fund exposed to the stock market.”

Two years out from retirement and some funds had as much as 80% in stocks?!

That’s criminal!

Those managers got greedy and wanted to keep their returns high, so they took on much more risk than advertised. That violates the entire intent of target-date funds, and also violates the faith with which investors invested in those funds.

Let this be a stark reminder that there is no true risk-free, cruise control method for investing. You have to know what you’re investing in.

Incidentally, this is also a reminder of why index investing is so popular. People in those funds could have invested 80% of their money in a broad based ETF (like the Vanguard Total Stock Market ETF VTI) and 20% in the iShares Lehman Aggregate Bond AGG ETF and gotten the same results (OK, very similar results) with far less fees and the knowledge that such losses were an inherent risk of the asset allocation, and not subject to the whim of a fund manager!

Photo by chego101

• 5 Things to Do When You Have a Bad 401(k) Plan. 401(k) plans can be a great way to save for retirement and let your savings grow tax-free. But the plans are chosen by employers and managed by 3rd parties and don't always have the best options. IRAs give you the entire universe of investments to choose from, but most employers......
• A Sample ETF Portfolio for Vanguard Fans. The Vanguard family of funds has many fans in the individual investor community. With their dedication to low expense fees, it's no surprise. Much has been made of the drag on performance of high fees, and there is a growing investment community that not only shuns investments with high fees,......
• Mutual Fund Monday - How to Compare Funds. The Mutual Fund Monday post this week is a highlight of a recent post from Kyle over at Amateur Asset Allocator . Millions of Americans own mutual funds in their 401(k) plans, and many others own them in their IRA's or even in a taxable, non-retirement account. But many people......
• A Sample ETF Portfolio for 100% Foreign Exposure. Exchange Traded Funds (ETFs) offer broad diversity in a single package, and if the ETF is an index fund then they carry added tax benefits when compared to actively manage mutual funds. When ETFs first hit the investment scene, they were simple index tracking funds. They mainly targeted passive investors.......
• A Sample ETF Portfolio for Maximum Income (and Fat, Juicy Yields). With the low fees and wide selection of ETFs, you can now build a portfolio for maximum and minimum fees relatively easily. Here's one such sample portfolio from Kiplinger that allocates 65% to bonds, 35% to stocks. The bond section is spread between conservative, laddered treasures and riskier junk bonds.......

• The Problem with Targeted Date Retirement Funds Investing in the market is not an easy thing to do. You have to do all sorts of research on investing terms, compare different stocks, mutual funds and other investments, and trying to make heads or tails of all of it can really be a nightmare if you’ve never taken......
• Pros And Cons Of Investing In Target-Date Retirement Funds. Photo by Mike LichtI'm sure that if you do any kind of investing at all you have heard about target-date retirement funds, where the stock and bond allocation inside the fund changes as you near your retirement date. All you have to do is pick a year (for me, it......
• Best Mutual Funds With Low Minimums Investing can be hard when you're young and don't have much money to invest. Sure, companies like T Rowe Price will let you invest as little as $50 up front in an IRA if you promise to invest an additional $50 per month deducted automatically from your checking account, and......
• Younger Investors Becoming More Risk Averse than Older Investors Some interesting, perhaps troubling, results from the Merrill Lynch Quarterly Affluent Insights Survey this morning. Younger investors are more risk averse than older investors. Those in their 20s and 30s are more risk averse than the 40s and 50s demographic because they been burned twice in the last decade. Older......
• How To Be A Smart Investor In Any Investment Environment [I've been a little backed up with my busy schedule of floating in the ocean and hotel pool in Aruba. Oh, and it's not like the steak here is going to eat itself. So while I get back to that, enjoy this guest post from fellow Money Writer, The Digerati......

It’s the end of July, and that means it’s time for a roundup of investing news, tips and general info from around the blogosphere!

ETFs.

• The ETF DataBase has a great post detailing the history of the ETF industry by way of 25 people who helped create it. Read The ETF Hall of Fame: 25 People Who Revolutionized the ETF Industry

• 76 ETFs For Foreign Stock Exposure from Bradley Johnson’s Personal Finance And Investing blog is an exhaustive listing of foreign ETFs broken down by single country, Region and more!

Investing Tips and Techniques.

• Trend Technician has a great post about why you shouldn’t Trade Without a “Stop”.

• The Amateur Financier provides a wonderful breakdown of Risk Management Strategies.

• Wise Money Matters gives a quick and handy breakdown of various types of stocks (not growth, value or large cap, small cap either) in What are the different types of stocks?

Warnings and Reminders.

• Moolanomy has a great reminder that sometimes Stock Volatility Kills.

• AllFinancialMatters reminds us (graphically) that Not All S&P 500 Index Mutual Funds Are Created Equal!

• 5 Energy Stocks To Invest In. Introducing the "new, pragmatic approach to energy investing" (as it is called by SmartMoney) - also known as the having it both ways approach. It's a new way to invest in energy stocks, and it mimics what the big oil companies themselves are doing. It's a hedge, really. It's investing......
• The One-Minute Portfolio. Here's the ultimate in super-simple investment portfolios, for those who don't have the time or inclination to pick and monitor individual stocks. The One-Minute Portfolio. The One-Minute Portfolio is comprised of just 3 asset allocations: Domestic Stocks, Foreign Stocks and Bonds. Here's a recommendation for each category: 1. Buy America......
• A Sample ETF Portfolio for Vanguard Fans. The Vanguard family of funds has many fans in the individual investor community. With their dedication to low expense fees, it's no surprise. Much has been made of the drag on performance of high fees, and there is a growing investment community that not only shuns investments with high fees,......
• Ivy League Investing For The Common Man. David Swensen has managed the Yale University endowment from 1984 to 2008 and during that time, the endowment returned an annualized 16.6% - 5 points better than the S&P 500 and a generic balanced portfolio of 60% in a stock index, and 40% in bond index. That equates to a......
• Why you Should Keep a Close Watch On Your Stops. Aaron Task at Yahoo! Tech Ticker has a post of the 5 Keys to the Market, from Todd Harrison, CEO of Minyanville.com. The money quote is near the bottom: "Given these crosscurrents, Harrison's advice for traders is to keep a tight leash on stops and be extra focused on risk......

• how to start investing If you have never invested anything before - nothing - what should be your very first investment? I am not a financial advisor, so take this with a grain of salt - you should consult with someone who knows your unique situation and can provide advice specifically for you. That......
• Happy First Birthday My Journey to Millions It is shocking that I wrote my first post the first week of August one year ago! In that post I discussed my credit card debt, and how much I hated it.  Well, the Wife and I in honor of fighting off the credit card demons for one full year......
• Money Management Tip – Always Check for Errors Money management tips come in all shapes and sizes. Some relate to complicated matters like maintaining a diversified investment portfolio or maximizing your retirement plan contributions by taking advantage of employer matching contributions. Other money management tips, however, can be very simple. In fact, one of the simplest tips I’ve......
• Mutual Funds Introduction It is really not much of an exaggeration for you to say that mutual funds are one of the best things that the middle class can take advantage of financially since the invention of sliced bread. What mutual funds do, is they allow for investors that have small amounts of......
• Want to Be an Active Investor? Try a Fantasy Stock Market Game First! So you want to be an active investor? Maybe you think you have what it takes to cash in like the daytraders from the late 1990s trading those high flying tech stocks.  Or perhaps you think you can ride the coattails of those evil oil speculators that pushed light sweet......