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Investing in Mutual Funds

December 11, 2011 | Author admin

If you are looking for enhancing your financial portfolio then you must certainly consider your options in investing in mutual funds. More and more people are considering investing in mutual funds a good enough option to be able to save a wonderful egg nest for their retirement and other long term financial goals.

Advantages:

When you put your money in these funds, you realize that they offer the investor several benefits such as diversification and a professional way to manage money. But at the other end of the spectrum is the risk that is involved in this investment option. Also, there are taxes and fees that are a part and parcel of invest mutual funds that will diminish the ultimate return on investment that you get. Returns from these investments are not guaranteed by the government and hence there is the risk of losing the principal amount invested. At the same time investing in these funds offer several advantages and that is why scores of people have started opting for them. The first is the affordability as any kind of investor even one without a lot of money on his side can start investing to garner benefits for themselves. There are several schemes for investing such as monthly payments, initial one time purchase and so on that can be customized based on the individual needs of the investor at large.

Redemption:

These investments can be redeemed by the investor at any point of time in the form of the current NAV on at that time. After a deduction of the charges the person can get the money back anytime.The liquidity that invest mutual funds offer the investors is far more when compared to others. Most investors like this kind of liquidity that the mutual funds offers

Posted in Investing | Tags: Affordability, Diversification, Egg, Financial Goals, Funds, Investing, Investing In Mutual Funds, Investment Option, Investments, Investor, Investors, Liquidity, Money, Mutual, Nav, Options Investing, Redemption, Retirement, Return On Investment, Risk, Spectrum, Start Investing, Time Purchase | No Comments »

Top 10 Reasons Why You Should Self-Direct Your Retirement Instead Of Investing In Mutual Funds

November 6, 2011 | Author admin

There are thousands of so called financial advisors that tell you that you should invest in mutual funds, money market accounts, stocks, bonds and life insurance policies and diversify your retirement portfolio. This is some of the worst financial advice you can get and the general public has been duped by the large investment companies like Fidelity, Charles Schwab, and the large banks for years. These so called financial advisors that work for these big companies have very limited to no training and are not incentivized in the right ways. They make so much money off of trading fees and annual fees that you can never get ahead even if they could outpace inflation in the first place with their investments. Well you do not have to put up with this theft anymore. There are retirement vehicles and custodians out there just like the Fidelities and Charles Schwab’s that enable you to self direct your retirement into almost any investment options you want and control your own financial future instead of handing it off to one of these so called financial advisors. What is a self-directed retirement account? It’s an account just like what you would have in Fidelity or a similar company but you can invest it in pretty much whatever you want instead of being limited to what the Fidelities of the world allow you to invest in, that they make the most fees on. So you can open an IRA, 401k, Roth IRA and HSA (Health Savings Account) that you can actually make decisions with and invest with. Here are the top 10 reasons you should self direct your own retirement instead of giving it to one of these large companies that basically steal your money in fees.

(1) Self-directing your retirement account is the only way to protect your own retirement. If you do not take control of your own retirement investing and educate yourself on alternative investment options you will lose purchasing power and your retirement accounts will probably lose another 30% – 40% like we just saw with some of the major economic problems we are seeing. Massive inflation is looming so you have to invest in assets that produce a higher return.

(2) Self-directed custodians typically have fee structures that do not completely deplete your returns like the traditional IRA and retirement companies. Typically you have much smaller transaction fees, much smaller annual fees and you can find ways to cut down on fees even more as a percentage of your retirement account. You want to keep the interest and returns you make, not pay them back in fees which can significantly hinder your retirement’s growth.

(3) You can build your retirement a 1000% faster by self directing your retirement than not. If you are investing in traditional investments like mutual funds and stocks you are only going to make the long term historical average of those investments at best depending upon the economic stability of the market. The long term historical averages are close to 8% – 10%. With inflation historically at 3% – 3.5% and even higher inflation expected that is not a high enough return. By investing in alternative investment options like real estate you can make 15%+ returns on your money without even using leverage. You can even leverage real estate (get a loan for real estate) inside your own retirement account increasing your returns to 20% plus. Now that is power especially when you can do it safely with the right risk mitigation techniques in place.

(4) By self directing your own retirement account you can actually actively control your investments. When investing the traditional way you have absolutely no control and have a significant amount of risk when investing in mutual funds and stocks. You are at the mercy of what the market does. When you self direct your own retirement you can control the assets inside your account. You can structure the investments so that no matter what the market does you are making residual cash flow inside your account so you do not have to worry about market fluctuations. You also have the power to increase the value of the assets inside our account. Also, if you buy discounted real estate inside your IRA not only can you then go sell for a huge profit but you are building your retirement account tax free.

(5) Tax free investing is one of the largest benefits of investing in a self directed IRA. Can you imagine buying a rental property worth $100,000 for $75,000, renting it out for $1,000 per month, having all of the income going back to your retirement account tax free and then when you go to sell the property for $100,000 the $25,000 in profit is tax free also. No capital gains taxes and no taxation on the rental income. This can compound the growth of your retirement accounts at an amazing pace.

(6) Building an annuity inside your retirement account is crucial to your retirement plan. For example, if you need $5,000 a month to live on during retirement and are able to make a conservative 10% on your money inside your account you need $600,000 in your retirement account in order to retire and NEVER deplete your principal. If you leverage your investments and make 15% on your money inside your retirement account you only need $400,000 in your retirement accounts. So unlike what most financial planners will tell you, you don’t need $10,000,000 dollars inside your retirement account to retire. Now keep in mind if your expenses are $5,000 per month, you want to be making $7,500 per month passively so that you can continue to build your income and protect yourself from the loss of purchasing power due to inflation.

(7) Current tax planning and saving on current taxes is a huge advantage for self directed investments. If you invest in an IRA your current contribution limit is $5,000 and $16,000 for a 401k. This can bring a big tax advantage because the contribution directly decreases your taxable income dollar for dollar. If you setup a solo (k) plan or pension plan you can contribute close to $100,000 per year and reduce your taxable income by $100,000! This is unreal. You are saving $35,000 per year by doing this if you are in a 35% tax bracket. Tax rates are rising because the government and states are broke so it’s even more crucial to plan for taxes. You can then go take that $100,000, invest in passive cash flow investment property right and have the income making you 15% plus on your money. With both combined you just made $50,000 ($35,000 tax savings + $15,000 interest) on your $100,000 that year. Now if that is not going to get you to your goals I don’t know what will.

(8) Self directed investing increases your education and ability to protect yourself instead of relying on someone else for your retirement. By self directing your retirement you are now taking control of your own retirement. With that comes the need for you to educate yourself on additional investment options and the risks and rewards of those options. This education is going to be key to your future financial success and stability. The more you educate yourself the more stable you will be because as economic changes happened you will be in a better position to protect yourself and adjust your retirement portfolio according to those changes.

(9) Additional investment options are needed in order to secure your future. There are so many investments that produce additional returns. You can still invest in stocks, bonds, mutual funds like traditional companies allow you to invest in but you can also invest in real estate, promissory notes secured by real estate, tax liens, businesses, syndicated and structured investments and much, much more. Your options are limitless.

(10)Your piece of mind knowing that you have been able to structure yourself to protect against economic fluctuations is HUGE. Now you can rest easy knowing that you have educated yourself correctly, have invested in vehicles that can give you higher returns, and have the power to control your own financial destiny is the best benefit you can ask for. Most people have little to no financial knowledge and that is why most people are broke. The more you educate yourself the more successful you will be.

There are many companies out there that can help you self direct your retirement account and many companies out there that can help you structure your self-directed IRA into multiple cash flow streams. Learn from those companies and push yourself to take action on your own financial future instead of relying on so called financial advisors to do it for you, but are failing at an alarming pace.

Posted in Investing | Tags: Alternative Investment, Charles Schwab, Fidelities, Financial Advice, Financial Advisors, Financial Future, Funds, Health Savings Account, Hsa Health Savings Account, Instead, Investing, Investing In Mutual Funds, Investment Companies, Investment Options, Life Insurance Policies, Money Market Accounts, Mutual, Purchasing Power, Reasons, Retirement, Retirement Account, Retirement Investing, Retirement Portfolio, Retirement Vehicles, Roth Ira, SelfDirect, Should, Stocks Bonds | No Comments »

Some Basic Facts About Investing in Mutual Funds

October 9, 2011 | Author admin

These schemes normally invest a major part of their fund in equities and are willing to bear short-term decline in value for possible future appreciation.

The Building Blocks

To invest in mutual funds, you need to first understand what they are, and how they work. Even more basic is your grasp of stocks and bonds. Very quickly, stocks stand for shares of ownership in a public company, and bonds are money lent to the government or company, on which you receive interest. These are the two most common forms of investment, owned and loaned (real estate and precious metals being examples of others), but we are presently concerned with these instruments, since most mutual funds invest in stocks and/or bonds.

Simply, mutual funds act as intermediaries and facilitate investments in various securities (stocks and bonds). The logical question here would be: why do I need a mutual fund? Why can’t I just invest directly?

The Mutual Fund Advantage

Investing in a mutual fund allows you to minimize risk and maximize returns, because it acts as a middle man for a group of investors with a shared and predefined investment objective. If your main objective is security in investment but you don’t know how to begin, a mutual fund is one way to go. Typically, a fund manager will maintain the fund, and since you are one unit or share holder in the fund, you have the added advantage of easy investment, and lower trading costs.

Who are these fund managers?

SEBI-approved Asset Management Companies (AMC) manage the funds by making investments in various types of securities. This means that all recognized AMCs are monitored by higher authorities and stringent regulations, and funds are managed by professionals who have the necessary expertise.

How is your risk minimized?

Typically, investing in a mutual fund means investing in more than one stock. Some fund managers will diversify and spread your investment further by buying a mosaic of stocks and bonds. Investing in a large number of assets, or diversification, means that a loss incurred on one investment is minimized by gains in others.

How are trading costs reduced?

Since the AMC buys and sells large amounts of securities at a time, transaction costs are reduced, and the benefit is extended to the investor, because the average cost of the unit is lowered.

There are three ways in which you will see returns on your investment in a mutual fund:

through dividends on stocks and interest on bonds;
through capital gains, if the fund sells securities that have increased in price and the fund distributes these gains;
and by selling your shares when the holdings increase in price.

Mutual funds can either be open-ended or close-ended in nature. With open-ended funds, you can either enter or exit the fund any time during the scheme period, by buying/ selling fund units – this means a high degree of liquidity. Close-ended funds, as the term implies, means that an exit is possible only when the scheme period is over.

Mutual fund schemes in India are varied, and cater to a wide range of requirements and profiles, based on financial position, tolerance to risk, and expectations of returns. Each mutual fund has a specific stated objective. The fund’s objective is laid out in the fund’s prospectus, which is the legal document that contains information about the fund, its history, its officers and its performance.

High on risk and high on return are Equity funds. Also known as Growth Schemes, the aim of these schemes is to provide capital appreciation over medium to long term. These schemes normally invest a major part of their fund in equities and are willing to bear short-term decline in value for possible future appreciation. They may be further classified into Diversified Equity Funds, Mid-Cap Funds, Sector Specific Funds and Tax Savings Funds (ELSS).

Debt funds, or Income Schemes, invest in debt instruments, typically issued by the government, private companies, banks and other financial institutions, and promise low risk and a stable income. These schemes generally invest in fixed income securities such as bonds and corporate debentures. Capital appreciation in such schemes may be limited. Further classification includes Gilt Funds, Income Funds, MIPs, Short Term Plans and Liquid Funds.

Balanced funds are a mix of both equity and debt funds. They invest in both equities and fixed income securities, providing both growth and stability.

Money Market Schemes promise high liquidity, preservation of capital and a moderate income. These schemes generally invest in safer, short-term instruments, such as treasury bills, certificates of deposit, commercial paper and inter-bank call money.

Tax-saving schemes offer tax rebates to the investors under tax laws. For example, under Sec.88 of the Income Tax Act, contributions made to any Equity Linked Savings Scheme (ELSS) are eligible for rebate.

Index schemes track and emulate the performance of a particular index such as the BSE Sensex. The stocks in these portfolios will mirror those in the Index, as will the percentage of each stock retained. Returns will therefore mirror the movement of the Index.

Finally, a further benefit from investing mutual funds is the 100% Income Tax exemption on all Mutual Fund dividends. For Equity Funds, short term capital gains are taxed at 15%. Long term capital gains are not applicable. For Debt Funds, short term capital gains are taxed as per the slab rates applicable to you. Open-ended funds with equity exposure of more than 65% are exempt from the payment of dividend tax for a period of 3 years from 1999-2000.

Posted in Investing | Tags: About, Amcs, Asset Management Companies, Basic, Building Blocks, Facts, Fund Managers, Funds, Grasp, Intermediaries, Invest Stocks, Investing, Investing In Mutual Funds, Investment Objective, Logical Question, Main Objective, Middle Man, Mosaic, Mutual, Mutual Fund, Necessary Expertise, Precious Metals, Share Holder, Some, Stocks And Bonds, Stocks Bonds, Stringent Regulations | No Comments »

The Pros And Cons of Investing in Mutual Funds

September 11, 2011 | Author admin

With the financial crisis gripping the entire nation, the fate of all our investments has gone haywire. Although there is a sign of optimism and the economy is starting to show the signs of recovery, the citizens have become too wary to let their money go off; particularly if it is for the wrong investments. A large number of citizens are still trying to combat their financial hardships; the number is no less for those who are still trying to sort their debts and financial obligations with the help of debt settlement companies. As a matter of fact, there has been no such a thing as a guaranteed investment. The investment prospects which were previously considered as sure targets of profit can readily fall apart. Because of this reason, none of us would like to put all our investments in the same basket; for no one knows as to what will happen to our investments tomorrow. Diversifying the investments would imply that even if one of them fails to get the desired profits, the other would make up for the difference. Under such circumstances, a mutual fund seems to be great idea wherein various companies are going to create a pool fund by pulling in money from individual and institutional investors. Thereafter, the money is going to be utilized to buy a variety of stocks and security assets. They are one of the most popular ways to own the corporate shares without buying the individual stocks. Let us explore the pros and cons of investing in mutual funds:

The greatest advantage of owning mutual funds is to diversify the investments. In the recession hit America, there is hardly an investor who will own a large sum of money unless of course they may inherit a fortune. A mutual fund has at least that much of an amount and couple with that is the money which comes from the investors. Even if one or two of the companies do not perform up to the mark, it will be compensated by the good performance of others.
It helps you to avoid the vagaries of investing in individual stocks; most of the investors are simply unaware of the various aspects of picking a stock e.g. which one to buy and when to invest? For mutual funds, the fund managers have the requisite skills and experience to invest.
The money that has been invested in mutual funds can be liquefied at any point of time. Although, it is not possible to expect good returns always but the money can be cashed out at one’s will.

However good that a mutual fund might seem, it will have us to pay the desired costs. There is no government authority or insurance to protect the funds in case there is a major price drop. The investors are expected to bear these risks at their own cost. Moreover, the investors might get hot with the annual fees and the sales commission irrespective of the performance of their funds. The price of the shares which constitutes a mutual fund is calculated only once a day; this in turn implies that you are not likely to know your order of profit before the financial markets come to a close. According to US tax laws, the mutual funds are supposed to distribute capital gains to the share holders which are taxable.

All investments have their share of advantages and disadvantages. However, with a judicious selection and little patience, one is actually able to reap big profits by investing in mutual funds.

Posted in Investing | Tags: Buying Stocks, Cons, Corporate Shares, Debt Settlement Companies, Debts, Fate, Financial Crisis, Financial Hardships, Financial Obligations, Funds, Guaranteed Investment, Institutional Investors, Investing, Investing In Mutual Funds, Investment Prospects, Investments, Matter Of Fact, Mutual, Mutual Fund, Optimism, Pros, Pros And Cons, Recession, Sum Of Money, Vagaries | No Comments »

Mutual Funds With High Yields

June 19, 2011 | Author admin

When we invest in mutual funds, we should ensure the crucial element that, we should be able to get maximum benefit out of the investments and leverage out of it in monetary terms. If we have the right strategy we can get high yield returns from the mutual funds.These high yield mutual funds can yield as much as more than 15%.

Some of the funds that declared such high dividents are

JHFunds2 High Income
Fidelity Real Estate Hi-Inc
RidgeWorth High Income I.

Before investing in any mutual funds, ensure that you study the company which you are planning to invest. Analyze the profile of the fund manager who is responsible for the company. Research the performance of the mutual fund for the last one year and for 3 to 5 years. Get the information about the management, its vision and objectives.

The mutual fund companies which give high returns have assets worth $9.6 trillion. These funds invest in emerging markets and gain great benefits out of it. There are funds in real estate, gold and other commodities. The mutual fund market in the US is the largest with a variety of factors in its favor in the realm of specific objectives and reflects the wishes and hopes of the investors to remain invested over a specific period of time and allow them to gain personal financial objectives. These High yield funds can work perfectly as cash management tools that will give you a huge amount of liquidity and a competitive edge in being able to get for one self a high yield of return within the shortest possible time frame.

Posted in Investing | Tags: Cash Management, Commodities Market, Competitive Edge, Dividents, Emerging Markets, Fidelity Real Estate, Financial Objectives, Funds, High, High Fidelity, High Yield Funds, High Yield Mutual Funds, Leverage, Liquidity, Management Tools, Maximum Benefit, Monetary Terms, Mutual, Mutual Fund Companies, Mutual Fund Market, Period Of Time, Time Frame, Trillion, Yields | No Comments »

Investing in Commodity Mutual Funds

May 22, 2011 | Author admin

when we invest in commodity mutual funds, they generate good returns for our investment when compare to other investments. The latest buzz on commodity mutual funds makes it more attractive for the investor to invest in it.

It also helps to diversify the portfolio and minimize the risk when compared to investing in equities. By this we will be able to spread the risk factor and that can generate good returns for any investor.

Investing in commodity mutual funds are seen as a great way to moderate one’s self against inflation as the prices of the basic commodities go up and push up the inflation index so is the case with the commodity mutual funds pricing. This games using numbers can be really beneficial to the investor.

These funds are headed by professional fund managers who have vast experience in analyzing the performance of commodities and commodity mutual funds. They exactly know what is going to sell in the market. They are very clear about the market conditions and analyze the demand and supply for certain commodities and also the trade that will be carried out. This kind of in depth market analysis enables them to be able to get the most out of commodity mutual funds.

When an investors plan for investing in commodity mutual funds, they know that the risk involved is very less when compared to other form of investments as the markets tends to remain far more stable. Also the commodity mutual funds do not have a specific tie in time or expiry date.

Posted in Investing | Tags: Buzz, Commodities, Commodity, Commodity Mutual Funds, Demand And Supply, Funds, Games, Inflation Index, Invest, Investing, Investing In Equities, Investments, Investor, Investors, Mutual, Professional Fund Managers, Risk Factor | No Comments »