Personal Finance and Money Management 17 - Types of Mutual Funds

As we mentioned in previous articles we know that our government only represents about 30% of our retirement income. The company retirement pension plan offers another 30 % and many of us do not have one. It is up to individuals to invest wisely short and long term in order to make up for the short fall if he or she would like to live comfortably after retirement without giving up some retirement plans. In this article, we will discuss types of mutual fund.

Mutual fund is a pool of investor's money and is sold as a unit. It is an open end fund and managed by professionals. It also must meet certain regulations of the security commissions and laws governed before it can be sold to the general public. There are 4 types of mutual funds depending to the fund objectives:

1. Balance fund

a) Their purpose is to maximize a balance of capital appreciation and income, yet preserve capital.
b) It contains a combination of debt and equity securities. The proportions of bond and security are adjusted according to economic conditions.

2. Equity fund

a) Dividend fund
i) Invested in dividend-paying stocks.
ii) Maximize income by specializing in stocks paying high dividends.
iii) Allows investors to take advantage of the dividend tax credit, but they don't give many capital gains dividends.

b) Growth fund
Invested in common stocks for capital appreciation.
There are 3 types of equity growth fund
i) Broad spectrum funds: invested in any company with growth potential.
ii) Market segment funds: invested in a specific sector of the market, such as oil and gas, precious metals, commodity, or high technology.
iii) International funds: invested in specific countries such as China, Japan, Russia, and European countries.

3. Specialty fund

Specialty funds have the below characteristics:
These types of fund investments are strictly in specific commodities, such as gold funds only allowed to invest in gold bullion or gold certificates, real estate funds only allowed to invest in property, Oil and gas only allowed to invest in oil and gas producing companies, as indicated in the fund prospectus.

Personal Finance and Money Management 18 - Understand the Fee of Mutual Funds

As we mentioned in previous articles we know that our government only represents about 30% of our retirement income. The company retirement pension plan offers another 30 % and many of us do not have one. It is up to individuals to invest wisely short and long term in order to make up for the short fall if he or she would like to live comfortably after retirement without giving up some retirement plans.

Mutual fund is a pool of investor's money and is sold as a unit. It is an open end fund and is managed by professionals. It also must meet certain regulations of the security commissions and laws governed before it can be sold to general public. In this article we will discuss mutual fund fees.

1. Acquisition fee
If fees are imposed at the time mutual fund shares are purchased, it is called an acquisition fee or front-end loading charge. It used to be 1- 5% of the amount purchase. Investors can always negotiate for a lower fee with their financial adviser.

2. Redemption fee
Fees are paid at the time when money is withdrawn from the mutual fund. Redemption fees represent a percentage of either the amount of the initial investment or the current market value of the holding, usually 5% and decreases over time depending on the years of money remaining in the mutual fund purchased. Usually after 7 years, the money withdrawn carries 0% redemption fee.

3. No load fund
No load funds do not charge sales fees. Most no load funds do not have sales forced. It usually finds investors through advertising, direct mail, and still charging a management fee and probably a trailer fee arrangements with stockbrokers.

4. Managing fee
a) Management fees are represented as a significant cost for both closed-end and mutual funds, usually range from 0.5% to 2.5% being deducted directly from the assets of the fund before calculating return to investors. Some specialty have managing fees over 3%.
b) A good way of comparing the management fees of various funds is the management expense ratio also known as MER. MER, expressed as a percentage is an annual ratio of all fees and expenses to the average net assets of the fund excluding sales fees.
c) All fund companies pay their agents annual commissions, known as trailer fees.

Unlike no load funds, most acquisition and redemption fee funds are sold through financial advisers or insurance agents who also have mutual fund licenses. They are experts in their field. It is nice to have someone to talk to after initial purchasing.

Before deciding to invest in mutual funds, it is necessary to look at the 10 years return graph of each fund, the fund manger and expense ratio. Please do not assume all of these types of funds are the same, some equity funds always return below the same equity index while others have beating the same index year over year.

Invest Your Money in Mutual Funds

People nowadays are very particular about financial matters. When it comes to money, they want to make sure they have investments. Investments can be made in different ways. Other people are investing their hard-earned money on real estate. They believe in the power of real state to generate a lot of profits. Many are purchasing land which appreciates in value in the long-run. Another kind of investment like dealing with stocks is also profitable. When you know the right strategies and techniques in the stock market, you'll surely find your fortune in stocks. People are finding ways on how to produce more money and be financially independent.

They want to look at many possibilities of good investments. There is another type of investment for you to explore. You've probably heard of mutual funds. Investing in mutual funds is also considered as a wise way of putting your money into good use. If you don't know how to manage your investments yourself, this kind of investment is really for you. Mutual fund is a form of collective investment scheme wherein a professional manages the fund. The money invested by the investors will be pooled into one and the fund manager will invest it in stocks, money-market instruments, bonds and other kinds of securities.

Majority of the funds' portfolios are under the supervision of a professional. These professional have vast experienced in the investment field. They will appropriately invest the money into securities which will greatly benefit the investors. The performance of the manager is very well a determinant on the outcome of the fund. If the manager has managed well the fund, everybody will surely be happy and wealthy. That's why it's imperative for the investors to check the performance of the manager. You should determine the manager's capability in the handling the fund. The investment portfolio is usually diversified, meaning it should not concentrate on one investment alone.

A portion of the fund can be on high-risk investments while others are invested on low-risk securities. The manager typically invest large amount of money on companies with outstanding financial performance. The task of the professional is essential in the growth of the fund. The mutual fund company do research and study the trend in the financial market in order to know where to invest. Every company listed in the stock market is thoroughly researched. Its annual report is also carefully studied. There are many kinds of mutual funds like open-ended, equity and exchange-traded and others. There are some which are invested for a particular industry.

Like for example, a Pharma fund which is invested only in pharmaceutical companies. Investment in mutual fund doesn't necessarily require you to shed big amount of money. Even in small amount, you can now invest; you just have the option to invest every month if you want to. You can invest your hard-earned money in whatever means you know. Investing in mutual fund is one way. Just remember that your money is in the hands of a professional. They will manage it efficiently and effectively for you to reap great benefits.

Mutual Funds For Everyone

The stock market is a wild and crazy world to be in, and is definitely not for a place for amateurs to be playing about. In this jungle, investing in the wrong places can get you beaten, eaten, and spat out like gum. But what if you can get a professional to place you in a favorable position? Like take care of all your investing concerns, as to where you should be putting your money, the returns you'll be expecting to receive, and when you should do it? Well for the jungle, you'd need somebody like Tarzan to keep you safe, but when it comes to this money market, you'd need mutual funds - why is this so, you ask? Well because this type of investment is managed by professionals, guys that know everything about the entire market, guys known as fund managers.

They understand that you know nothing about how things work (no offense), so they take the liberty of getting things done on your behalf. What that means for you is that there's no need for you to be watching over your investment, they'll be doing it for you. They'll also be pooling your money into what's hot, not in "what's not", which is a major advantage considering your ignorance, friend. Getting that kind of management service elsewhere would equate to you paying large sums of cash, something you most definitely won't want. Mutual funds have another advantage, which is its liquidity - here you'll be able to convert your financial investments into cash instantly.

To be more specific, you can sell your shares anytime of the day the stock market is open. Try comparing that to the other "hard-to-liquidate" investments, which can takes weeks to move. In case of emergency purposes and other instances where you'll need cash quick, they suck! Like pooling your dough into real estate, which is really hard to move, and can take months. Stocks with low trading volume also take time to liquidate. This is one of the many advantages you can reap from investing in mutual funds. One worth mentioning is the type of investments your "financial advisers" would be putting your money into - why? Because there are plenty! The diversification of mutual funds is vast, so to speak.

They don't stick with one type, but to many, that they may get the highest expected returns from each one. They'll put your money into hundreds of stocks, bonds, and many other money markets out there. Try doing that in your own portfolio, and I can guarantee the following results: for that matter will result to ridiculously high trading fees. Second thing that can happen is you winding up in a mental facility, which is very much possible considering the fact that you'll have to be monitoring all those stock positions. Last advantage would be the very low fees of mutual funds, since the experts running the show take advantage of the economies of scale.

This is why this is becoming very popular nowadays. Thousands of people can make a living off this business; maybe it's time for you join them.

Learning About Mutual Funds Investments

Time is money and the clock is ticking. Why is there a strong need to save for the future? Why do we look for ways to earn more and save more? The answer is very simple. It is for security. Security for the time when we no longer have the capacity to support ourselves. That is why there are people who invest greatly in Mutual Funds Investments and it has been noted that people all over the world have invested in mutual funds to secure their future and to finance their goals or whatever it is that they want.

To those who do not know, mutual funds come from a variety of investors. The investment could be anything. It could be stocks, bonds, and others. One does not have to have a lot of money to be able to participate in mutual funds especially since there are some that are set at a low price. That is why there are more people who can only afford mutual funds investments which can also be the reason why mutual funds investments are the more popular form of investment. Of course, another reason why it is more popular is because one can pull out the money anytime that they want.

However, one has to know that it is not a game and one has much to learn. Good thing there are a lot of available resources. The important thing is one has to learn all that one can before investing in anything, either in Mutual Funds or some other kind of investment. Remember, those who took the trouble to learn has been rewarded greatly than those who did not.

Mutual Funds - The Need to Know Basics

Almost everybody has the ambition to get rich without lifting a finger - that's because there's plenty of us out there that are driven by laziness and greed. We like to find ways for having our cash work for us, or apply the Law of Leverage, which is to multiply our efforts through others. A classic example of that would be an Egyptian Pharaoh having his slaves build infrastructure or gather the rice grains which he uses for sale/trade - he doesn't do anything, but gets all the work done and gets richer and richer. You're not a Pharaoh, so how do you get rich? Well one way would be putting your money in a median that can help you reach that particular financial goal.

One "vehicle" that can get you there are mutual funds, how does this work? Simple: what you do is buy mutual funds from a mutual fund company or broker. From there, the company that you've entrusted your cash with invests it into a variety of short term investments, like the following: assets, bonds, stocks and securities. What happens next, if all does go well, is you receive dividends for each of the mutual funds you've purchased, which is your share of the profit made off it. Some people (many perhaps) find the whole process scary because they have no idea what to do first or feel that it's too much risk to take.

Fear not old friend, your investment is being managed by the company's team of investment professionals - these guys know exactly what they're doing and find the best ways possible to ensure that you make money. It's like having a symbiotic relationship with them: if they do good, you do good, heck all of you do good. Usually an investment manager does the buying and selling on your behalf, making sure all goes in your favor. As the investments diversify, the risk of loss gets lower and lower, which is clearly what everybody wants. There are three types of mutual funds, the first being: equity funds - which is basically investing in common stocks.

This is considered to be very risky, but it can also mean lots of money for you. The second type are the fixed income funds, which is a lot safer due to the fact that they're basically government and corporate securities. Here you don't take that much risk, which in some cases could mean that you don't earn that much (as compared to investing in equity funds). Lastly, we have balanced mutual funds, which consists of stocks and bonds. This type of investment is the safest amongst the three stated here, but it also is the "slowest earner" of all.

The discussion of the three kinds of mutual funds brings up an old saying: "no risk, no reward" - I forgot who said it, but I do know that it does apply to the basic "operating principle" of mutual funds. Important reminder: your shares can be sold back to the broker or to another customer at your will. If your interested in getting into this game, then I suggest you do more research about the different companies you could invest in.

Tis the Season For a Double Whammy For Mutual Fund Investors

As most investors find it gut wrenching in facing the significant losses they have incurred, could you be an investor that receives a "double whammy" this year? Imagine if you own mutual funds in a taxable account down significantly this year, only to find out next year that you have unexpected tax bill! How can that be? Here's how many mutual fund investors could be taxed on a mutual funds that have performed horrible this year.

Given the historic downturn in the financial markets and extreme volatility, this year could be one of the worst years in highlighting the inequity of the tax code for mutual fund investors. Mutual fund companies are required to pay out year-end distributions to their shareholders when they receive any profits on the investments they sold throughout the year. Given the extreme market volatility and panic by many investors demanding their money, many mutual funds sold investments that they might have owned for a long time to meet the demand of redemptions. Although these realized gains are probably not as large as a year ago, they are still gains that are passed proportionality to the shareholder regardless of whether the shareholder has a positive return this year.

What can a mutual investor do? Although you can't change the tax code or the selling that went on in a mutual fund you may be able to dampen the potential tax burden. But you have to act quickly. December is a time most mutual funds report the year-end distributions. Call your mutual fund company or don't let your sleeping, shell shocked advisor forget to alert you to your potential mutual fund distributions/ tax liability before December 31st! If in fact you are going to receive some taxable distributions from mutual funds you own, there are many simple strategies to dampen or completely offset this tax liability since many investors have losses this year. It would be horrific to have your accountant next year alert you to an additional tax liability when it could have easily been avoided.

This article DOES NOT CONSTITUTE TAX ADVICE. PLEASE CONSULT YOUR TAX ADVISOR

Securities and investment advisory services offered through LPL Financial Member FINRA/SIPC

Turn 4000 Dollars Into 1 Million - A Fun Strategy For You

Are you looking for a fun strategy that will turn $4000 dollars into $1 million? If you are, then you are in luck. If you have $4000 to invest, the idea is for you to put your money into 4 mutual funds. This means you are going to invest $1000 per mutual fund. This is something that you want to repeat for the next several years.

As for the structure of your mutual funds, you can adjust your risk. You can put one together that involves some of the larger stocks. Another one can consist of smaller stocks. Your third one can consist of foreign stocks. And your fourth one can consist of some bounds.

When you do this, you are diversifying your portfolio and you are diversifying it well. Why do you want to do this? Well, when you diversify your portfolio, you are spreading out the risk. You may have some high risk stocks in there that will result in larger returns, low risk stocks that will most likely gain but will do so over time, and some foreign stocks that have varying levels of risks. As for your bonds, you can achieve varying levels of risk there as well.

So if you have a high risk stock fail you, you have other stocks working for you. There are plenty of individuals who have experienced a large loss, but had so much money that had been made by their initial investment that they technically didn't lose a dime.

Another thing that's great about this strategy is that it is a lot of fun, especially as you ride the roller coaster ride of the stock market. You will have ups and downs, but you will find that it is a rewarding experience.

Investing 101 - What is a Mutual Fund?

It's not much of an exaggeration to say that mutual funds are the best thing for the middle class in America since sliced bread. They allow investors with small amounts of money to invest take benefit from the economic output of the U.S. economy in a way once reserved only for the wealthy.

Put simply, a mutual fund is nothing more than a public investment pool. You, along with thousands if not millions of other small investors with perhaps only a few hundred dollars to invest at a time, own an interest in an investment company that invests on your behalf, giving you access to the kind of sophisticated, professional money management that until a few decades ago was nearly impossible to come by unless you were already a millionaire. Needless to say, this is a major benefit to small investors everywhere and helped level the playing field between the lower, middle, and upper classes.

Mutual funds typically have stated investment objectives. For instance, some mutual funds invest only in large U.S. companies while others invest only in the stocks of foreign countries. Some invest only in small stocks while others invest in different asset classes entirely, such as bonds, real estate, and even commodities such as oil, sugar, and so on. Many experts say the mutual fund industry has gotten carried away by creating a different mutual fund for every tiny sector of the market imaginable, but others applaud such action as encouraging investors to take control of their own financial destiny.

Whichever side you fall on, there is no doubt that mutual funds belong in the portfolio of practically every investor, both large and small. Small investors benefit from being allowed to invest small amounts continuously over time, eventually resulting in substantial amounts of money in retirement. Large investors benefit from being able to easily and inexpensively delegate the responsibility of managing their finances to competent professionals, allowing them to sit back and enjoy the fruits of their labor rather than spending all day researching different investments.

How Do Mutual Funds Work?

Gain is possibly the one word that is imprinted in our minds ever since we first perceive the light of this world. If you agree with this notion of life, then you are someone who wants to play safe and yet make huge profits. For people like you, in 18th century Europe, economists came up with the brilliant idea of low risk-huge turnover concept of mutual funds. What exactly is a mutual fund? Is it an investment in stocks and shares or does it also involve bonds and securities? What are the risks involved? What are its advantages over the other stocks and funds available in the market? All these questions can be quite easily answered but first we must devote our time and attention to grasping the basic idea behind mutual funds.

To understand how mutual funds work is almost like child's play but investing in it wisely is a practice that gets better with experience. A mutual fund is an investor's pool that gathers money from a large number of investors and invests it in stocks and shares of diverse companies. The investments that are made are collectively known as the portfolio. The components of a mutual fund may be stocks, shares, and money market funds.

Generally these investments are bought buy an overseer called a professional investment manager, or an Asset Management Company. In true sense, a mutual fund is also an organization that manages the assets of several investors. The investment manager decides which stocks would yield the highest dividend, which investments are prone to market risks and how to avoid probable market crashes by selling the stocks at a particular time. These investment managers provide you that are the stakeholders or shareholders in the company's investment in understanding the mutual funds and its various intricacies.

Mutual funds are several types each divided into categories based on a certain criteria. For example there are load on funds where you have to pay a certain amount above the selling price of the stocks or shares to the investment manager at the time of buying or selling. If its front-end load on fund, then while buying the share or stock, the payment is made. In case of a rear end mutual fund, the payment has to be done during the process of selling the share or stock.

However, in to understand how mutual funds work, one has to know the three categories into which mutual fund investments are made-

1. Equity Funds: - These are composed of common stocks which are they a very risky investment. The best thing is that despite the high rich these provide a good income from the dividends obtained on the shares.

2. Government Bonds- These are bonds sold by the governments and professional security companies, which means that they are of a low risk nature. But along with the low risk involved comes the devil of low profits.

3. Balance Funds involve both government funds and common stocks from a wide range of companies. Here too the risks are low along with subsequent dip in the profit from each share. But since the investment is done, keeping in mind a diverse array of companies, the chances of a loss here or in this mutual fund INS highly minimized.

Mutual funds are subject to market risks. So, one should always read the offer document carefully before investing. Till then keep on researching and investing in mutual funds and try to spread your to understand how mutual funds work among the uniformed masses.