Start early when investing in funds
By Peter Brooks - Staff Reporter
Investing in mutual funds as early as possible should yield great results over time, a Highline business teacher said this week.
Bill Webster, a professor at Highline for more than 40 years, talked about mutual fund investment during an event yesterday hosted by the Small Capital Investment Club.
"Start as early as possible," he said. Even a monthly investment of $50 can be invested well and allow you to build your investment over time, Webster said.
A mutual fund is an open-end investment company that invests money of its shareholders in a usually diversified group of securities of other corporations.
Investment companies are comprised of professionals who invest your money in the best way possible. Comparing an individual investor to an investment company is like the difference between researching for 15 minutes a day for one person, or 24 hours a day by 35 specialists.
Diversification is what they do best in order to produce growth with less risk. This is possible by spreading investments across many individual companies, usually in a wide variety of industries.
"The most important part about mutual fund investment is compound interest," Webster said.
Compound interest works by combining interest from current and previous years and boosts investment returns over a long-term plan.
If you're not looking for a quick payout, then this is the best way to generate money through investment, he said.
Webster said that the second most important thing to know about mutual fund investment is dollar-cost-averaging.
Dollar-cost-averaging is investing in the same amount of money into a stock and/or mutual fund on a regular basis.
Usually, it's one way to make money over the long term of five years or more, even if you pick a poorly performing stock, Webster said.
It works by buying more shares when the price goes down, and buying fewer shares when the price goes up. This results in a low average cost per share.
By dollar-cost-averaging, you take the guess work out of investing, Webster said.
"The third most important concept is to develop a plan and stick with it," Webster said.
Statistics show most of the time investors are better served when they buy shares and stick with their plan despite a market drop, since it tends to rise with more value than when you started.
By utilizing a mutual fund group and sticking to compound interest for long-term investment, and dollar-cost-averaging, it's relatively safe and assured to generate a small fortune over a long period of time.
Webster said he was always interested in investing.
"My father avoided stocks and dealt in real-estate," Webster said. In 1968, a man named Jack Strickler told him the benefits of mutual funds, saying that people should invest as soon as possible even with a small investment at first.
"He went to MIT to become an engineer, and retired from Boeing in 1966," Webster said. "He became a manager in brokerage and realized mutual funds with compound interest investment is extremely useful."
Webster said he didn't believe Strickler at the time and wishes he had, which inspires him to teach others about this.
"If you can invest on a monthly basis and put it in a quality mutual fund, you will end up with a portfolio worth more than your house, over time," Webster said.
Webster is scheduled to teach Business 133, Basic Money Management, during Summer quarter. The course will take place Monday through Wednesday from 9 to 10:20 a.m.