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Invest In Your Retirement With High Dividend Mutual Funds

March 12, 2012 | Comments: 0 | Views: 162

High Dividend Mutual Funds

High dividend mutual funds are distinct in that the companies who run them choose to only invest in high yield dividend stocks. These kinds of investments can be a great way to save for retirement, and the best part is that they don't need to be managed very much. If you have the money to invest in high dividend funds, there's nothing to stop you from embarking on the following directions and getting started investing in your future.

Opening A Brokerage Account

The first step is to get a brokerage account, if you don't already have one. This can be done on your computer, over the phone, or by visiting your local bank in person. Be sure to first check with whoever managers your employer sponsored savings (401k) account. It's possible that you could get a discount by using an account that you might not have even known you already had. Next you'll need to select your stock. There will be a wide variety of high yield dividend mutual funds to pick from, but unless you think that an actively managed fund (which will have a higher expense ratio) will do better than those currently out on the market, you should go for a dividend index fund.

Selecting A Mutual Fund

The point of choosing an index fund is that they don't receive a lot of management. They track certain groups of stocks through the market, leaving the manager of the fund to only worry about how much of each stock should be purchased. The result is lower fees and expenses for you, meaning that more of your money will be put toward buying shares. After you've chosen, you'll invest. Funds will have to be placed in your account in order for your transaction to be made, which you can either do electronically or via check. Inform your broker of the fund that you've chosen once the money is in your account, and they'll purchase the fund for you.

Reinvesting Your Cash Dividends

The biggest part of investing in high dividend mutual funds is making sure that the dividends will be reinvested. A dividend reinvestment plan, or DRIP, is set up so that every three months, when your fund issues a dividend in cash, that money will then just go toward buying more shares from that same fund. This means that your dividends will then be earning dividends. And therein lies the magic of high dividend funds.

Connor Swinney is the owner of the What Are Mutual Funds website. He created the website to be used as a resource for people who are looking for more information on What Are Mutual Funds? or that would like to know how they can create a successful investment strategy.

Source: EzineArticles
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