A Beginner's Guide To Usaa Mutual Fund Investing

USAA is a private, member-owned company that has provided its members with insurance and other financial services for more than 100 years. It offers a full line of stock and bond mutual funds.

1. USAA S&P 500 Index Fund Reward Shares

2. USAA Growth and Tax Strategy Fund

3. USAA Extended Market Index Fund

How to open a brokerage account

USAA is a private, member-owned company that provides insurance, banking, and investment services to military members and their families. It is not possible to buy stock in USAA directly, but eligible members can become part-owners.

If you are interested in investing in mutual funds, you can do so by opening a brokerage account. Here is a step-by-step guide on how to open a brokerage account:

• Understand the different types of brokerage accounts: There are two main types of brokerage accounts - taxable investment accounts and retirement accounts. Taxable brokerage accounts have no limits on contributions or what you can do with the money, but you won't get the tax benefits found in retirement accounts.
• Choose a brokerage firm: You can open a brokerage account with an online brokerage company, which will enable you to buy and sell investments through their website. Some popular options include Fidelity and TD Ameritrade.
• Gather the required information: To apply for a brokerage account, you will typically need to provide your Social Security Number, personal information such as your phone number and address, employment details, and annual income.
• Complete the application: The application process is usually straightforward and can be completed online within 15 minutes.
• Fund your brokerage account: Once your account is open, you will need to link a checking or savings account to your brokerage account or wire funds to your account. You can also transfer funds from another brokerage account if you are changing companies.
• Choose your investments: Consider your time horizon and goals when selecting investments. If your brokerage firm offers educational tools, use them to inform your investment choices.

It is important to note that while opening a brokerage account is typically a simple process, investing in mutual funds or other securities carries risks. Be sure to do your own research or consult with a financial advisor before making any investment decisions.

How to set an investment goal

Setting an investment goal is a critical step in building a focused financial plan. Here are some steps to help you define your investment goals:

Step 1: Identify your goals

First, you need to identify what you're investing for. Are you saving for retirement, buying a home, planning for a child's education, or some other financial goal? Knowing your specific goals will help you create a plan to achieve them.

Step 2: Set SMART goals

Once you know your goals, it's important to make them SMART:

• Specific: Clear and specific, rather than general.
• Measurable: Allow you to track your progress.
• Achievable: Within your control and reach.
• Realistic: Attainable based on your current circumstances.
• Time-based: Have a timeline for progress or completion.

For example, if your goal is to buy a home, you might set a SMART goal to save a certain percentage of the down payment within a specific timeframe.

Step 3: Figure out your investment strategy

There are two main types of investment strategies: active and passive. Active funds employ a fund manager to actively pick stocks and bonds that will outperform the market, while passive funds aim to deliver returns that match the market. Passive funds tend to be cheaper and often outperform active funds due to their lower fees.

Step 4: Research mutual fund companies and funds

When choosing a mutual fund company, consider their fees, performance over time, and regulatory issues. Then, research the specific funds they offer and choose the ones that align with your goals and risk tolerance.

Step 5: Open an investing account

You can open a standard brokerage account, a 401(k) retirement account, or an individual retirement account (IRA). Compare the fees and investment options to choose the best account for your needs.

Step 6: Buy mutual fund shares

Some mutual funds have minimum investment requirements, so be sure to check before buying. You can usually buy mutual fund shares once per day at the closing price of the market.

By following these steps, you can set clear and achievable investment goals and create a plan to work towards them. Remember to regularly review your progress and make adjustments as needed to stay on track.

How to decide on the right mix of stocks and bonds

When deciding on the right mix of stocks and bonds, it's important to consider your investment goals, time frame, and risk tolerance. Here are some key points to help you determine the ideal mix:

• Investment Goal: Are you investing for retirement, a down payment on a house, or some other goal? It's easier to focus on one goal at a time.
• Time Frame: How much time do you have before you need the money? Will you withdraw it all at once or over several years? A longer time frame allows for a more aggressive strategy.
• Risk Tolerance: What is your comfort level with risk? Stocks are generally riskier than bonds, and bonds are riskier than cash. A higher percentage of stocks in your portfolio increases potential returns but also exposes you to more risk.

A common strategy is the 60/40 portfolio (60% stocks and 40% bonds), which offers a mix of risky and stable assets. However, you can also consider investing in commodities like gold and oil for more diversification.

When deciding on the mix, keep in mind that historical data shows that different asset classes perform differently over time. Stocks tend to offer higher potential returns but with higher risk, while bonds provide more stable returns with lower risk.

Additionally, consider the costs associated with active and passive funds. Active funds employ fund managers to actively pick stocks and bonds, while passive funds aim to match market benchmarks. Passive funds tend to have lower fees and often outperform active funds due to their lower expenses.

How to pick an investment strategy

• Set clear goals: Define your financial objectives and time horizon. Are you investing for the short-term or long-term? Do you want to save for retirement, buy a home, or fund your child's education? Knowing your goals will help you determine the appropriate investment strategy.
• Choose the right account type: Decide whether to invest through a standard brokerage account, a retirement account like a 401(k) or IRA, or a taxable brokerage account. Each option has different tax implications and investment choices.
• Determine your asset allocation: Decide on the mix of stocks, bonds, and other holdings in your portfolio based on your risk tolerance, investment horizon, and financial goals. A common strategy is the 60/40 portfolio (60% stocks and 40% bonds).
• Active vs. Passive Management: Choose between actively managed funds, which aim to beat the market through professional fund management, and passively managed funds (index funds), which aim to replicate the performance of a market index. Passively managed funds tend to have lower fees and often outperform actively managed funds.
• Research mutual fund companies and funds: Look into reputable fund companies like Vanguard or Fidelity, and research their menu of fund options. Consider factors such as fund fees, historical performance, and the fund's investment strategy.
• Monitor and Rebalance: Regularly review the performance of your mutual fund investments and make adjustments as needed to ensure they align with your financial goals and risk tolerance. This may involve buying or selling fund shares to maintain your desired asset allocation.

How to research mutual-fund companies

Researching mutual-fund companies is a crucial step in making informed investment decisions. Here are some detailed instructions to guide you through the process:

• Define your investment objective: Start by understanding your financial goals. Are you investing for retirement, a new house, or a short-term purchase? Each scenario requires a different investment approach and asset class. For example, if you're saving for retirement, a money market fund may not provide sufficient returns, while risky biotech stocks may not be suitable for short-term vacation goals.
• Screening and data analysis: Utilize brokerage accounts or websites like Morningstar.com and Lipperweb.com to screen and compare mutual funds. Look at their five- and ten-year performance, manager tenure, fees, and costs. The expense ratio, or the ongoing fees charged by fund managers, is an important factor to consider, as it can impact your bottom line over time.
• Check the prospectus: Mutual funds are required by law to disclose information such as holdings, financial conditions, investment strategies, and risks. Read these documents carefully before investing.
• Evaluate past performance: Assess the overall quality of the fund. Consider the fund's management team, historical performance, and volatility. Be cautious of high levels of turnover, which can create taxable events if your funds are not held in tax-advantaged accounts.
• Diversify your portfolio: Spread your investments across different types of funds to minimize risk. Consider investing in international funds, bonds, real estate, fixed-income funds, and other asset classes to create a well-rounded portfolio.
• Focus on long-term growth: Remember that past performance does not guarantee future results. Conduct thorough research and maintain a well-balanced, diversified portfolio to maximize your chances of long-term growth.
• Understand fees: Mutual funds typically have front-end or back-end sales loads, which can range from 1% to 5.75%. Additionally, consider the expense ratio, which is the annual fee charged as a percentage of your investment. Keep in mind that fees can significantly impact your investment returns over time.

Frequently asked questions