Income Mutual Funds - What to Do With Your Under Performing Mutual Funds For 2010 and Beyond

Investing in mutual funds for income is not a good investment; it holds too many variables and uncertainty. For one thing they are very illiquid, they are very expensive to manage and because the percentage of mutual funds that loses money is so high, it makes it very likely that you will lose money if you invest in it for a short period. Thus trying to earn a weekly or monthly income from mutual funds is almost impossible. Yes it can be done if you have a really huge portfolio of $10million or more.

Today I am going to show you the proper way to invest in mutual funds to build yourself a financial empire for your grand children. Notice that I said grand children, because mutual funds are for long term investment, the longer you invest, the better your chance of making a decent return. Note that if you find a solid company to invest into for the same period as the mutual fund. Your return will almost always out perform any mutual funds. Consider this as well, the risk will also be much greater than the mutual fund investment.

Over the coming weeks and months I will be writing as series of articles on topics such as:

ETFs, Stocks, Bonds -commercial, Income Trust, REITs, Virtual Banks Company Drip programs and Profit sharing and much more.

Since 99% of mutual fund loses money. If you invest for 50 years, you may lose money for 35 years, (having negative returns). In the other 15 years you might make a profit, some years you will do extremely well. The 15 years that you make money will average out and hopefully give you are turn of let us say 8% to 15% if you are luckily.

The best way to invest in mutual funds is to buy the fund that tracks the stock market; statistics shows that the stock market will always go up. If you buy this fund it will always go up too.

These funds are call index funds You can find some mutual fund companies that charges as little as 0.18% to manage their index funds, that is about $1.80 for every $1000. Invested. That compares to the industry standard of 3-6.7% or higher, (that is $67. For every $1000 invested). This is how I recommend you invest in index funds. You should have 75% to 80% of your savings invested in index funds, because we know that they will do as good as the stock market does over time.

Even if the stock market fall off a cliff, it always comes back right? Now if you remember reading in one of my recent article "Dirty Secrets of the Mutual Fund Industry" I told you to diversify both by sector and percentage. These companies has all the right index funds, that allows you to do that, You put 15%-20 % of your money into the US large cap index funds, 15%-20% into US small cap, index funds, 15% -20% into emerging markets index funds, 15% into Asia pacific, 15-20% into euro index fund and 10 to 15% into the mining and natural resources and 10- 15% into precious metals.

Let me make a disclaimer here: I am not recommending any mutual fund company nor am I getting any compensation for telling you about index funds. Also i am not giving personal financial advice in anyway; I am just stating my own opinion. You should always seek proper financial advice before you invest.

By investing this way you are covered across all the sectors and because you are in the index funds, you are not spread too thin. To manage your investment you can spend about 1 hour every 6 months or even once per year to adjust them. When you are doing your adjustment, take a look at what is under performing and adjust that to give a bigger portion to the over performer. Money will grow over time, that is the law of compounding interest.

In 1965 a couple gave $25,000 to a young investor to invest for them. In 1998 when the wife pass away, her investment was worth $750million. That is the power of compounding interest working; In just 33 years of 22% annual return, turn $25thousand into $750million.

By just earning 1% per day you could turn $2000 into $1 million in just about 2 year, visit. http://www.incomemutualfunds.info to learn how it is done

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Your Best Mutual Fund Investment Guide If Clueless

If you feel clueless this mutual fund investment guide is written for you. It may not be the best mutual fund investment guide ever written, but it could be the simplest. Where's your money? Chances are you already have an investment in funds, or will some time in the future.

Mutual funds are the easiest way in the world to invest in stocks and bonds. And stocks and bonds are the building blocks of any investment portfolio, whether large or small. The giant insurance companies and pension funds manage their own stocks and bonds. Most individual investors rely on fund companies to do the management for them. If you invest with the best mutual fund investment companies, you get good service and the cost of investing is minimal.

When you make an investment in mutual funds you simply invest a dollar amount. The fund company then issues you shares based on the price of the fund's shares upon receipt of your money. Then they invest your money along with that of their other investors. Equity funds (stock funds) invest your money in stocks. Bond funds invest in bonds; and balanced funds invest in both stocks and bonds. The value of these shares will fluctuate. Hence the value of your investment will go up and down as you hold it.

There is one exception to the above statement. The fourth major category of mutual funds is money market funds. The value of their shares is stable, at $1 a share. These are the safest funds, and they simply pay interest in the form of dividends. Funds that invest in stocks and/or bonds usually pay dividends as well. You can receive these dividends, or simply tell the fund company to reinvest your dividends to purchase more fund shares. The latter is automatically assumed if you hold mutual funds in an IRA or 401k.

Very simply, you just pick the funds to invest in and send in money. Whether in your 401k, IRA, or an account you open with a financial planner or on your own with a no-load fund company... you invest your money with them and they do the rest. You will also receive periodic statements that show you what you own and the value of any mutual funds you have with them.

Don't avoid mutual funds. They are the best investment for most people most of the time. These funds are also the investment options available in most 401k plans. You need to invest in stocks and bonds to put your money to work. Otherwise, you're stuck with money safely tucked away someplace making peanuts in the form of interest. When you think of stocks and bonds, think stock funds and bond funds.

We wrap up our fund investment guide with one of life's realities. Investment companies (mutual funds) do not work for free. The best mutual fund investment companies keep the cost of investing low, and most funds are reasonable in the cost department. If you want to invest on your own and keep the costs low, open an account with a no-load fund company. Your best mutual fund investment is often a low-cost fund with either of the following reputable fund companies: Vanguard or Fidelity. These two also happen to be the two largest investment companies in the fund business. Check them out on the internet, and call for free information.

If you explain that you have money to invest and want to learn more about their mutual funds, you'll get a nice package in the mail a few days later. Study the material, and you won't feel so clueless anymore. Good luck and I hope this basic investment guide has been helpful.

A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.

Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com.

Article Source: http://EzineArticles.com/?expert=James_Leitz

What is a Mutual Fund

A mutual fund is an investment company that pools together the money of its shareholders, and invests it in a variety of stocks, bonds or money market instruments. Mutual fund is usually managed by a professional fund manager, who is responsible for making investment decisions. By owning a share of a mutual fund an investor automatically owns all the shares the fund owns.

Over the years, mutual funds have become very popular amongst the investment public. Billions of dollars have flowed into mutual funds and they continue to expand. Two benefits of investing in mutual funds that make them so popular are, the ability of investors to automatically diversify their investments by buying shares of the fund and the professional management provided by the funds managers. These benefits make investing in funds especially appealing to novice investors.

Potential investors looking to invest in mutual funds will be faced with a wide variety of choices to pick from. There literally exists, a fund to match any type of investment objective out there. From growth to income to bonds and even "green" funds - funds that only invest in environmentally friendly companies, the number of funds available continues to expand every year.

To own a mutual fund, all a potential investor has to do is buy a share of the fund. The price of the share, termed its Net asset value (NAV), is determined by dividing the total market value of the funds investments by the total number of the funds shares outstanding. The Net asset value is calculated daily. Most mutual funds require you to make a minimum initial purchase. Funds can be purchased from a broker or from the mutual fund company itself. In order to cash in on a profit from a rise in share price or dispose of shares, an investor simply sells his fund shares back to the mutual fund.

An expense a potential mutual fund investor might have to deal with is the sales charge, called the load. Some funds require you to pay a load fee when you buy into them while others don't. Funds that require you to pay the fee are called Load mutual funds, while those that don't charge a sales fee are called No-load mutual funds. Studies have shown that there is no difference in performance between No-load and load funds. Another expense investors have to be aware of is the management fee charged by fund managers to manage the funds. It is usually a percentage of the total assets under management and varies from fund to fund. These expenses can add up quickly and investors should pay special attention to this.

Mutual funds continue to be a very popular investment vehicle and will probably continue to be so for the foreseeable future.

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A Small List of Mutual Funds

In the investment market, you can find a list of mutual funds to choose from. There are various investors in the market with varied needs, objectives and risk profiles. So, one fund cannot satisfy all the preferences of the investors.

Classification of Mutual Funds

Normally, an MF is classified into two broad categories:

-On the basis of execution and operation
-On the basis of yield and investment pattern

The list of mutual funds based on execution and operation are:

-Open-ended Fund - In this scheme, the corpus and time of the fund is not prefixed. You can purchase and sell any number of units at any time. The main features of these funds are flexibility, instant liquidity, not traded publicly through any exchanges, ability to repurchase and resell and so on. The main purpose is income generation and their prices are associated to Net Asset Value (NAV) of the units.
-Close-ended Fund - In this scheme, the corpus and duration of the fund is pre-determined. The fund expires when the subscription reaches the fixed target. The main purpose is capital appreciation. Since these are traded on stock exchanges, any market trend (both favorable and unfavorable) affects the performance of the fund.

The list of mutual funds based on yield and investment pattern are:

-Income Fund - The main objective of this scheme is to generate and distribute income to the investors periodically. The income generated is usually higher than that from bank deposits. The investment pattern is usually oriented towards high and fixed income generating securities. This is the best option for retired people.
-Growth Fund - These funds concentrate in generating long term capital appreciation and do not provide any regular income. They are also referred to as 'Nest Eggs' funds. The investment strategy is oriented towards equities which have high risk tolerance and high growth potential. This is best suitable if you are salaried or if you are a business person.
-Balanced Fund - These funds are a combination of income and growth mutual funds. They are also known as 'income-cum-growth' funds. They mainly concentrate in allocating regular income along with capital gains. The investment pattern is generally balanced between securities providing high growth and fixed income.
-Specialized Fund - These funds are oriented towards the special needs of specific categories of people. This fund allows foreign investors to invest in domestic securities of other countries. They are usually confined to a particular sector or industry. These funds are highly risky and serve as a good option for high risk takers.
-Money Market Mutual Fund (MMMF) - These are similar to open-ended mutual funds and have all the features of an open-ended fund. But, the investment strategy varies as these are invested in money market instruments like treasury bills, commercial paper and the like.
-Taxation Fund - This fund is essentially a growth fund. The only difference is that it offers tax rebates to the investors. This is the most suited choice if you are a salaried person as you can enjoy tax discounts.

Few Other Classifications of Mutual Funds

Apart from the above-mentioned classification, there is another list of mutual funds. They are as follows:

-Leveraged Fund - Also referred as 'borrowed funds'. They are mainly used to raise the value size of a fund portfolio.
-Dual Fund - These are a special form of close-ended fund. They give two different kinds of investors an opportunity to make a single investment.
-Index Fund - In this fund, the portfolios are designed in such a way that they move in accordance with the market index.
-Bond Fund - These are income generating funds. The portfolio mainly consists of securities like bonds which have the capacity to generate fixed income.
-Aggressive Growth Fund - These funds are more focused on capital gains. They are highly volatile and are usually invested in securities that are highly speculative.
-Off-Shore Fund - These funds are designed for non-residential investors. These funds are registered in foreign countries. They contain country and currency risk but the returns are high.

So, the decision to invest in mutual funds solely depends on your requirements and risk profile. You could pick a fund that suits your profile from the above list of mutual funds.

For more information about Mutual Funds, investment and strategies please prepare check list about Mutual Fund Market and Mutual Fund Investment.

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How to Buy Mutual Funds

Millions of Americans buy mutual funds by simply choosing them as an investment option in their 401k plan. How do people go about investing in mutual funds outside of their retirement plan at work?

There are at least three popular ways average people buy mutual funds, each with its advantages and disadvantages. Where to invest depends to a large extent on how involved you are willing to get in the process. Some people want to learn how to invest, and others want to rely on someone else to handle their investments.

Let's look at three popular ways to buy mutual funds, starting with how to invest if you want to rely on someone else.

If you want to buy mutual funds with a minimum of time and effort on your part, contact an investment professional. Even though these folks usually call and solicit you, you can call them. Look in the phone book under financial planners, stock brokers, or investment services. Some life insurance agents sell mutual funds as well. Perhaps your local bank or credit union has a representative on board who sells mutual funds.

The advantage of this approach is that someone helps you make financial decisions, and deals with the details, including the paper work. The disadvantage is that you will pay sales charges (loads) and/or other fees that you can otherwise avoid. Rather than choosing a professional at random, I suggest you ask investors you know who they deal with, and how they feel about them. Needless to say, some professionals in the investing business are better than others at their job.

A second popular way to buy mutual funds is the "supermarket" approach. For example, by opening a brokerage account with a major discount broker, you should have access to hundreds of funds to buy. To get started, go to your computer and search for "discount brokers". Once you have an account with money in it, to buy mutual funds you just click to buy.

The advantage here is the wide selection of funds available from several different fund families. You should be able to buy funds without sales charges, but there will be transaction fees, which are often quite reasonable. On the other hand, this is basically a self-serve supermarket. If you want advice on how to invest or where to invest your money, service is limited.

The third approach is to go with a no-load fund family like Vanguard, Fidelity, or T. Rowe Price. Search "no-load funds" on your computer to find a list of them. These investor-friendly investment companies have toll-free numbers you can call for assistance in opening up a mutual fund account.

There are numerous advantages to this third approach to investing in mutual funds. You deal directly with the mutual fund company, there are no middlemen. You can talk to their representatives toll-free and ask questions without sales pressure. They are used to talking to average folks who are not rich, and who don't speak the language of Wall Street.

The major no-load fund families offer a broad variety of mutual funds that have no sales charges, and often have some of the lowest yearly expenses in the industry. This makes their no-load funds a low-cost way to buy and hold mutual funds. Plus, these mutual fund companies offer investor assistance and services that are free of extra charges and fees.

When you invest with a no-load fund family, you can buy or sell mutual funds on your computer or toll-free on the telephone without paying any sales charges or transaction fees.

The disadvantage here is that you make your own investment decisions. You decide how to invest and where to invest your money in the various mutual funds they offer. Plus, you may be required to fill out your own forms, like the application required to open an account.

You can save thousands by buying no-load funds directly from a no-load fund company. This is the best way to go IF you are up to speed on how to invest and investment basics. If you are still clueless, there are plenty of articles available to help you learn about investing and mutual funds.

A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.

Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com

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Mutual Funds - Shredding the Evidence

It's legal. And it's a lie. It's an amazing truth about this highly regulated industry. Understanding these contradictions can make a big difference as you decide how to invest your money for your future. The most amazing disconnect: The mutual fund industry exists to protect and grow your money. Turns out it's a myth, an illusion, the stuff of dreams, or maybe even a nightmare. And it's amazing how much time, money, and effort is spent to cover up this most important fact. The truth is, the mutual fund industry just doesn't grow your money that well.

Taking a look at how all mutual funds invest, 85% of them are "actively managed." This is basically anything that isn't an index fund or a value fund. This means that they invest in various stocks, bonds, and money market funds, have an investment objective, and are actively managed by a portfolio manager. But even many value funds are actively managed. So if you add in that 5%, 90% of mutual funds are actively managed, leaving only 10% to "unmanaged" index mutual funds.

A study done for the New York Society of Security Analysts, covering about eight years, from 1997 to 2005, compared the 20 largest mutual funds. They were compared to the S&P 500. One thing that was found was that out of the 20 largest mutual funds, five were either closed down or merged into another fund. This is an example of how their behind-the-scenes work serves them, not the investor. When a fund family has a bad mutual fund, they get rid of it. Fund managers just make it disappear and recombine the assets with other funds.

One result of this is you can't find the returns on that mutual fund. A company can't have funds that make that mutual fund company look bad if their main purpose is to market funds, after all.

This manipulating of returns is called "survivor bias." If you're in a mutual fund that's underperforming, they will merge you into another mutual fund and delete the history of the bad performer. When an investor looks at a mutual fund company, of course the company will promote all their great performing funds of that moment. It's all a part of the great deception.

Even though they always issue the standard disclaimer that past performance doesn't indicate future results, they know that showing those great returns over the past year or two will entice you in. Of course, they also know this is not likely to be the best thing for you. Also, they will continue to shut down the bad funds. An investor can never get a true picture of the performance of a fund company because of the way they manipulate their numbers.

What the previously mentioned research from 1997 to 2005 found was these 20 largest mutual funds grew by an average of -9% a year. This information will never be found in a press release from any fund companies. From 1997 to August of 2005, these funds were losing 9% a year. During that same time period, the S&P 500, available in an unmanaged index fund, was growing at -2.7%. So this was still losing each year, but nowhere near as bad as -9% each year. These 20 largest funds did three times worse than an unmanaged, cheaper index fund. It's important to know this often-hidden information before investing money in the market.

RC Peck, CFP®
Registered Investment Advisor, Founder of Fearless Wealth
Investment Education for Successful Professionals.
http://www.fearlesswealth.com

RC has recently released a special report called, "29 Minutes to Investment success," which outlines "One Tool" that causes mutual fund managers to tremble and stockbrokers to weep with fear.

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