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, 16:08, 5 June 2008Fixed income mutual funds allow you to invest in corporate or government securities that usually offer a set rate of return on your investment.
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== Understanding Mutual Funds In The Newspaper ==
We’ve all seen the financial pages in the newspaper. Usually we flip past it on the way to the comics, the horoscope, of if you’re like me, to the sports section. But what do all those squiggles and arrows mean anyway, and now that you’re thinking about investing in mutual funds, can you see how your fund is doing every day in the morning paper?
The answer is, of course, yes. And not only that but mutual fund listing are a bit easier to read with less complicated jargon that reading the stock prices next to it. Most major daily newspapers have the mutual fund section separate form the rest of the stock and bond information. There is usually a large, bold headline showing where the fund are listed.
Now that you’ve found where the mutual funds are listed, let’s try to decode all this information. Your fund will be listed alphabetically in the column under the name of the company that manages it. You’ll see three column next to each fund name. In the first column, you’ll see “NAV”. This is short for “Net Asses Value.” Don’t panic, this is just a simple mathematical formula that shows what each share in that mutual fund is worth. To determine how much your shares in that mutual fund are worth, just multiply the amount of shares in that fund that you own by the NAV.
The second column says Offer Price. This is what you would pay right now if you wanted to buy more shares. Often, you’ll see a NL in this column instead of a price. I bet you can figure out what that means. Yep! It means it’s a no-load fund and you would pay what the NAV is if you wanted to buy more shares. Not so scary anymore, is it?
The final column is the change column. This information is the same essential thing that you would see if you were reading the stock page: a + in this column shows that the value of your fund has gone up since the last day’s close, and a – shows that it’s gone down.
And that’s it! While the mutual fund page in your newspaper may look bizarre, once you break it all down you can see that it’s all pretty basic. So start checking your funds today and you can watch your money grow!
== Types Of Mutual Funds ==
So, you’ve decided to jump into the mutual fund investment game. While mutual funds have shown themselves over time to be a safer bet than regular stock trading, there is always the chance you could lose your shirt. But the type of fund you choose will have a lot to do with the amount of risk you take on and the kind of return you’re looking for. For starters, mutual funds are usually broken down into six main categories.
Equity mutual funds allow you to invest in typical shares of common, everyday stock.
Fixed income mutual funds allow you to invest in corporate or government securities that usually offer a set rate of return on your investment.
Balanced mutual funds allow the investor to take on a fund that includes both stock and bond options.
Maybe the safest form of mutual funds are known as money market mutual funds. They offer a high degree of stability for your principal, as well as high liquidity if you need to back out.
Bond mutual funds are popular since they invest in tax free as well as taxable ones.
And finally, sector/speciality funds are used to help diversify your holdings within a particular industry.
Each of these types of funds can be both aggressive and risky with a high level of reward possible, or they can be safer and lower risk. It all depends on which fund you choose.
To break things down further, equity funds are usually divided up into four different categories: Growth and Income mutual funds, International mutual funds, growth mutual funds and aggressive growth mutual funds. Each different type of fund has a particular goal in mind. For some, it’s to aggressively pursue income, even in risky situations, while others seek to preserve the initial investment and only take smaller chances.
As you can see, the mutual fund landscape is filled with so many options, it can make a newbie’s head spin. But fear not, there is almost limitless information available on which mutual fund is right for your particular investment strategy. Not only do most mutual funds and those that run them have their own website, there is endless advice as to which fund is right for you on the Internet, as well. Don’t forget to utilize publications like the Wall Street Journal, as well as friends and family who might have had particular luck with a specific fund. Welcome to mutual fund investing!
== Tips To Invest For Retirement ==
People choose mutual funds for investing for many different reasons. Some people start very early (the smart ones) with dreams of a second house in the German Alps or a thatched roof pub in the English countryside. For some, mutual funds are a practical and easy way to save for the college education of their kids, or even grandkids. But without a doubt, the most popular reason for mutual fund investing is saving for retirement. With social security looking less and less helpful, many realize that investing to save for retirement isn’t a choice anymore, but a must. Here are some tips for those that are looking ahead to their golden years with mutual fund investing.
First off, the earlier you start saving for retirement, the better. Convincing a 25 year old recent college graduate that they need to put some of their income away to save for college can be almost impossible, but trust us, the sooner you start, the better off you’ll be.
Take a financial inventory of your life. If you have several retirement accounts from jobs you’ve had since you were 30, you can easily combine them now into one savings account. You can also figure in the value of your home, your possessions and your savings to get an idea of how much net worth you have and how that can relate to your ability to save for retirement.
While this may sound like a basic idea, setting goals in a big part of saving for retirement. Get together with a financial expert and decide what age you want to retire at and how much money you’ll need per year and how long you expect to be retired for. Knowing all this will help you plan long term for your retirement.
Try to open an emergency account. This account, which should be all cash, can be for emergencies that you may face while you’re trying to save for your retirement. The main purpose is that in case something goes wrong, you won’t take the money you’ve been saving for your retirement out and use it. That money needs to be kept where it is so you can keep marching towards your retirement goals.
While saving for retirement can be difficult, using various investment tools including mutual funds can really help. Combine that with solid advice from your broker and you will be well on your way to celebrating your retirement years in style.
== Tax And Distributions ==
Most investors would agree that mutual funds are a great way to help create a nest egg, save for retirement or for your kids’ college education. There are, however, an entire series of taxes that are levied against investments of all kinds, including mutual fund investments. While they may not always seem fair, they are a fact of life and the more you know about all the various forms of taxes, the better prepared you’ll be to deal with them.
While there are fees associated with some mutual funds when you open the account, and taxes for capital gains as the money appreciates within the mutual fund, there are also a series of taxes associated with the distribution of earnings from the mutual fund back to you. These distributions can take on several different forms, such as capital gains, income dividends and interest. A mutual fund is legally obligated to give out all of the investors income and the money that the fund made. But what exactly is an income dividend?
Income dividends usually include dividends, capital gains and interest that is earned by the mutual fund company minus the expenses and fees are taken out. The distribution associated with capital gains is usually made once per year to the shareholders. These capital gains come from a year of good performance by the mutual fund. When a mutual fund company pays out dividends to their shareholders, the NAV or net asset value of your mutual fund will go down, but you can also take that dividend pay out and buy more shares if you’re happy with the performance.
There are ways to help avoid the tax liability of reinvesting your dividends back into your mutual fund. Most distributions done by mutual fund companies is done near the end of the year. If you don’t want to spend the payout on Christmas presents, you can reinvest the money, but you should do it after the record date. This will help you avoid extra tax liability on your dividends.
Paying taxes on your distribution is a pain. But if your mutual fund is performing well, a small tax on your earning won’t hurt so bad. This is another reason why intelligent, well managed investing is so important. Not only do you have to worry about your fund going up and down in price, but also tax liability. That’s why it pays to invest wisely and use a disciplined approach.
== Selecting A Mutual Fund ==
When you first get into investing, you have to have a clear idea of what it is you want to accomplish. Most people have long term financial goals like saving for retirement or saving for a second home or maybe to put the kids through college. You also have a time frame. You have 20 years to make this money, or if you get into investing at a younger age, you could have 40 or 50 years to spend investing before your goal comes due. These are all vitally important questions that you need to have answered before you start investing. They will tell you what sort of fund to select for your portfolio. Here are a few general tips for selecting a fund that’s right for you.
If your goal is to have the most growth to your capital that you can get, than an aggressive growth mutual fund or an international growth mutual fund is for you. These kind of mutual funds invest in stocks that are hot and have a great potential for hitting it big. The chance for your capital to increase is very high, but the risk involved in these stocks is also extremely high. They are only recommended for long-term investors who can afford to take a hit if need be.
If you’re looking for a high amount of capital growth, but you aren’t ready for that degree of risk, try growth mutual funds, specialty or sector mutual funds or international mutual funds. They tend to look more towards long-term success in common stock, not a quick hit. The risk is still considered high with these mutual funds, but it’s not as high as the previous option.
If your goals are a bit different and creating current income is a big part of what you want to do, than growth and income mutual funds are right for you. The risk level with these mutual funds are ranked high to moderate and they invest in common stocks with a good possibility for dividends and appreciation of your capital.
If your main goal is to create a high amount of current income and capital appreciation isn’t a concern, then fixed income mutual funds and equity income mutual funds would be the right choice. The risk is considered moderate to low, but the potential for current income is very high.
Selecting the right mutual fund for you is a very important decision. You must have a clear idea of your goals to make the right choice. Once you know your position, you can be well on your way to enjoying success in mutual fund investing.
== History of mutual funds ==
== History of mutual funds ==
