Make money with mutual funds
By Barubder Sandhu - Staff Reporter
Students, particularly those with a limited income, can accumulate wealth over time through mutual funds, a Highline business instructor said last week.
Bill Webster is a broker for American Mutual Funds and has been an instructor at Highline since 1968.
He presented on Feb. 1 to the Students Small Capital Investment Club about how a group of people who put their money together and let a professional handle and invest that money.
That process is called a mutual fund.
"You put your money in with John, Joe and Jane and hand it over to a specialist to manage and invest that money," Webster said.
You don't need a lot of money to get involved in mutual funds, he said. Many people start out with small payments initially.
"A lot of people don't have a lump sum of money to invest with, mutual funds allow you to put in small increments of money each month," Webster said.
One of his clients who started out by giving $50 a month, puts in several thousands of dollars a month now, and the client has accumulated more than $7 million through his mutual fund investments.
From a handout from the University of Washington, Webster showed the comparisons between an individual investor versus an investment company. He explained how an investment company is a full-time job whereas individual investors try to manage their investments in their spare time.
"An investment company has an average of 35 people working seven hours a day each on investments; 245 man hours per day and 61,250 man hours per year," Webster said.
"An individual investor spends 15 minutes per day, 94 hours per year," he said.
Only a small percentage of individual investors have done as well in the stock market as their investment companycompetition has, he said.
"Eighty to 90 percent of the time my mutual fund clients do better than individual stocks [clients]. Whether you put in $50 or $500,000, your portfolio is being watched," he said.
"Managers who put their own money in tend to work a little harder and smarter," Webster said.
The stock market often fluctuates and is unpredictable, but over time the stock market has continuously grown and had an average positive rate of increase.
There isn't a lot of risk if you put in the same amount of money each month in mutual funds, Webster said.
"By putting in the same amount each month you take out the guesswork, because the stocks go up and down but you're bound to make a small fortune," Webster said.
The key to accumulating wealth through mutual funds is starting early, explained Webster.
"People start to get involved in mutual funds when they're 50 years old. At that point they're working against the clock," he said.
Webster started to participate in mutual funds when he was 28.
"I started with putting in $50, that's all I had when I was 28," he said.
"Now I put in several thousand," Webster said.