Stocks Mutual Funds | Mutual Funds

Advantages of Selling Covered Calls

2009-06-10T03:17:00.001-07:00

Selling Covered calls is a great strategy to help you create consistent cash flow from the stock market. It can significantly help you to increase the return of just buying and holding.

So what are the advantages?

1. It gives you cash Flow

By selling calls on a stock every month you can create a somewhat consistent cash flow from that stock. Selling options is the only way to create an income from the market that is consistent and covered calls are the safest ways to sell them.

2. Help you During Down Times

If you own a stock and just hold it for the long term, eventually that stock will have a rough time. It is pretty hard to see one of your investments take a dive. But by selling calls on that stock you can recapture some of the losses that occur during a bears market, poor earnings, or just downward pressure.

3. Easy to manage

As far as trading goes covered calls are very easy to manage. All you have to do is sell a call on your stock and wait until expiration day. You do not have to manage the trade by constantly monitoring it and adjusting stops.

It is also a lot less stressful then something like swing trading which can really be hard to handle emotionally at times, especially for new traders.

4. The Returns are pretty Good

There are times when it is possible to get a 5% return or more in a month by selling calls on a stock. It would take a whole year for you to get that kind of cash flow from dividends.

For more on covered calls visit http://www.stocks-simplified.com/covered_calls.html

For some times to avoid selling covered calls visit http://www.stocks-simplified.com/Selling_covered_calls.html

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Chinese Stock Market - Time to Invest?

2009-06-10T03:16:00.001-07:00

After almost two-year bull market, the benchmark Shanghai Composite Index, which tracks both A and B shares, recorded a dismal performance since October 2007. In 2008, The Shanghai Stock Exchange (SSE) suffered an annual loss of over 60%, plunging 2560 points and being the worst performing market in Asia. No doubt, the primary mission of the SSE is to maintain stability in market development. Trading security and smooth operation of the market, the construction of blue chip market, market trading mechanism, product innovation such as the SHSE-SZSE300 Index ETF, and the bond market are among the priorities.

Shanghai, a city historically with deep ties to the western world, has been an international business center, but the Chinese capital market in some ways is still relatively isolated from the international markets. To fulfill China's goal to build Shanghai into an international financial and shipping center by 2020, Shanghai is taking steps to develop more sophisticated investment products, offer favorable tax policies to attract international investors, build a multi-layered financial market system, and promote the opening of financial services in the city. Investors embrace the idea of building Shanghai into an international financial center, which resulted in an instant Shanghai indext's 3.1% increase to 2361.70. One action to note is, for the first time ever, China will allow foreign companies to list in Shanghai. Foreign companies would be allowed to raise money through the Shanghai Stock Exchange and also to issue bonds in China. This could mean new territories for companies that are interested in extending their business to China or Asian markets. As the financial system of the third largest economy opens up and becomes more global, players of the financial world will become more interrelated.

China does not take this route without caution. To nurture start-ups, China has cautiously developed Growth Enterprise Market (GEM), which is an experimental, technology-based, Nasdaq-style stock market. Only more mature firms that have met requirements will be first listed. One can also judge by where GEM is planned to open, possibly in 2009: on the Shenzhen Stock Exchange. Shenzhen has traditionally been a test ground for new programs before they were rolled out to the broader market. Investors are cautious but remain interested, with vivid memories of the 2006/2007 SSE's over 300% gain as well as more than $3 trillion of loss in value from listed companies during the downturn; and it all happened when the Chinese economy still had a growth of 9% in 2008.

A growth of about 8% is widely expected. Investors keep a close eye on companies like Baidu (BIDU), China Mobile Ltd. (CHL), and both recently posted strong quarterly growth with warnings. Baidu reported a better-than-expected 23.5% increase in first-quarter net profits, but warned the global downturn was affecting online advertising including paid search listings, keywords, and ads on Baidu's pages. Holding over 60% of China's online search market share, Baidu, however, faces competitions from Google. China Mobile had a 5.2% first-quarter net profit increase, but warned about its slowing subscriber growth. On April 23, Baidu, the China search engine giant, has a market capitalization of 7.2 billion and a P/E ratio of 47.5x, and China Mobile, China's largest provider of mobile telecom services, 179 billion and a P/E ratio of 11x, although P/E multiples may not be as reliable in a downtime if forecasted earnings is used. In the territory of wireless technology, China's Ministry of Industry and Information Technology estimates that 170 billion yuan, or about $25 billion, will be spent on 3G networks in China in 2009. In 2009, China Mobile, will spend around 58.8 billion yuan, or US$8.6 billion in 2009 to build out its 3G network, while China Unicom (CHU) and China Telecom (CHA) will spend around 30 billion yuan, or US$4.4 billion each on building 3G networks. Two companies that are worth mentioning are Huawei and ZTE, which are winning contracts as China rolls out its 3G wireless technology, taking more market shares from their foreign competitors.

China's fiscal $586 billion stimulus and its planned spending of a third of the stimulus on railways, highways and power grids-related projects tends to benefit companies like China Zhongwang Holdings Ltd., Asia's largest aluminum-extrusion manufacturer by capacity, which has a railway compoent in its business and is promoting its IPO. Foreign investors are welcome in this market especially as joint-venture partners. China's government spending on infrastructure will certainly have an impact on some international players.

For information on business resources, stocks, real estate, business travel, culture and entertainment in Shanghai as well as shopping for Shanghai, China, or Asia related products and services, please visit http://shanghaipinnacle.com/

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Mutual funds are the average or inexperienced investor's best friend

2009-05-27T23:21:00.000-07:00

Mutual funds are the average or inexperienced investor's best friend. They are designed for every-day people who want help from professionals in managing their investments. To get technical, they are "open-end investment companies" that pool investors' money and manage it for them.

Investing in mutual funds is quite simple. Tens of millions of Americans trust their money to these investor-friendly investments. Let's take a look at how investing in mutual funds works.

Jack has a $10,000 CD maturing at the bank in a joint account with his spouse. He also wants to start investing about $5000 a year in a Roth IRA. He is looking to earn more interest on his CD, and wants more investment options for his IRA than his bank offers.

Jack does not really know how to invest his money, so he asks his old friend Jim for advice because he knows that Jim is an experienced investor. Plus, Jack is thrifty and does not trust salesmen, and that includes those who charge you to invest with them.

Jim suggests mutual funds with a major no-load fund family that he does business with. Jim knows how to invest, and helps Jack with the mutual fund applications. This required two different applications. The first was to open a joint account with the $10,000 CD money. The second was to open a Roth IRA.

The $10,000 was spit evenly with half going to a high-quality bond fund, and half to a money market fund. They did this because Jack wanted safety, but also wanted to earn higher interest than he could get at the bank. Jack would not receive the interest income the funds paid in dividends, but decided to have it automatically reinvested to buy more shares, so his investment would grow.

They opened a Roth IRA and set things up so that $400 a month would automatically flow from Jack's checking account to the IRA with the mutual fund company. Half would go to a balanced fund that invested in both stocks and bonds, and half to a money market fund. Once again, all dividends (and capital gains) would automatically be reinvested to buy more shares.

Jack wanted growth, but Jim knew him very well. Jack did not know how to invest, he was cost conscious, and he avoided risk whenever possible. That's why Jim had half of Jack's money going into money market funds. These funds pay competitive interest rates in the form of dividends. If interest rates in the economy change, the rate paid by money market funds change in step. Plus, they have a great record for low risk and high safety.

For now, Jack is happy, especially since all of this cost him nothing in sales charges or fees. For example, he sent the fund company $10,000. All of his money was invested to buy shares, with no sales charges. Plus, he has $400 a month going into funds in his Roth IRA. Once again, all of the $400 is going to work to buy shares, with no sales charges or fees.

The only cost to Jack is yearly expenses. Every mutual fund takes these costs directly from fund assets. Jack wouldn't even know this if Jim hadn't told him. On the other hand, Jack's expenses were very low compared to most funds.

Jim explained to Jack that on average, his yearly expenses for the type of funds he was in would amount to almost 1% a year with most mutual fund companies. Jack was paying about one-fourth of that, which put a smile on his face.

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

Best Ways to Invest $10,000 - The Growth Stock Mutual Fund

2009-01-03T21:32:00.001-08:00

What is the best way to invest $10,000? If this is something that you really want to know, know that there are plenty of ways in which you can invest this money. First, you have to determine how long you want to sit on this money. When do you want to see a return? You know that the faster you want to see a return the higher the risk that you are dealing with.

So let's say you want to sit on this money for 5 years. You can take your money and put it in a growth stock mutual fund. These may include international, aggressive growth, stable, etc. There are several different kinds. You just have to make sure that what you are investing in are stock mutual funds. Now, if you can't leave your money alone for a period of 5 years, then you may need to consider a CD or a bond.

But if you do plan on leaving it alone and you plan on investing in growth stock mutual funds, you will find that the risk to return ratio is quite amazing. You could make more in individual stocks, but you have to determine if the risk is worth it. But with stock mutual funds, the risk to return ratio is what you want to focus on. In the end, you may net more money due to the fact that the risk is lower.

So if you're wondering how to invest your money, this is a great way to go about that. So go ahead and invest and have a great time doing it. You might be quite pleased.

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Using Mutual Fund Ratings to Invest Wisely

2009-01-03T21:32:00.000-08:00

I've been looking at a couple of growth funds, as well as some no-load funds to get started. Since I don't have a lot of capital to invest at the beginning here, I figured that these types of funds would be my best bet. They'll allow me to diversify my portfolio to an extent that wouldn't be possible if I simply bought stocks on my own, and this will of course protect me from short-term market fluctuations. By using mutual fund ratings to identify good investment opportunities, I'm giving myself an excellent head start.

Mutual fund reviews can come from a variety of sources, including financial journals, investment magazines, and the Internet. Since I don't have much experience with the stock market, I've been sticking to trusted names for my information, such as The Wall Street Journal, Forbes, Fortune, Kiplinger's Personal Finance, and Money. All of these publications regularly feature comprehensive mutual fund ratings, and I can even access recent archives by visiting their respective websites.

I've also found a number of independent websites that publish their own ratings, but I'm a lot more wary of following any advice from these places. After all, sometimes it's hard to tell if a particular site is part of a class project for a 19-year-old college student or if it's actually run by people who know what they're doing. The last thing I need is to follow terrible advice and lose all my money!

I know that fund ratings are only the beginning, and even funds that score the highest in these reviews carry a certain amount of risk. But by reading as much as I can about these investments before putting my money in, I'll be in a better position to assess the risk vs. reward ratio and will be able to make smarter decisions that will hopefully pay off in the form of a nice, big retirement account that will sustain me through my golden years.

If you're in the same boat and want to start planning for a secure future, I recommend that you review fund ratings from trusted sources before you invest your hard-earned dollars. The extra research will be worth it!

Chris Jonas is a chef working in Soho, New York.

Check out these great Mutual Fund reviews and articles or the more specific Mutual Funds Comparisons articles and resources.

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Mutual Fund Investment Advice

2009-01-03T21:31:00.000-08:00

First off, why should you invest in mutual funds? Mutual funds are helpful for those who have limited time and resources, and would prefer to leave the management of their money to someone else. Mutual fund managers offer the expertise to invest in highly specialized areas such as international equities, and may thus be attractive if you would like to gain exposure to these markets without having to do the legwork yourself.

With such a wide array of mutual funds, choosing among them can be difficult. Nonetheless, there are three major criteria you should use to evaluate any mutual fund: the mutual fund's investment objectives, investment track record, and the mutual fund's expenses.

Mutual Fund Objectives

Choose mutual funds based on whether you are comfortable with their investment objectives. Different mutual funds have different investment objectives: growth, value, income, international exposure, contrarian investing. These will dictate the type of strategies followed by the fund - are the fund managers value investors? Or do they invest primarily for growth? Other funds adopt a strictly contrarian approach.

Extreme investment objectives naturally lead to more risky investment strategies - these are specifically the type of mutual funds you should be careful about investing in.

One indicator you should become familiar with is the Sharpe ratio. The Sharpe Ratio compares performance to fund volatility and is a good measure of risk. The lower the ratio, the better. The Sharpe Ratio is a very important measure of the level of risk you would expose yourself to.

Mutual Fund Performance

While past performance does not necessarily imply future success, it is nonetheless an important indicator. Compare the mutual fund's performance to the overall market and sector performance. Note that more than 70 percent of all mutual funds underperform, so scrutinize the performance figures carefully. What is the time span, what did the fund compare itself against, and what is the mode of comparison?

Mutual Fund Expenses
The third major factor you should carefully evaluate is the mutual fund's expenses. Look at the expense ratio. This ratio sums up all the costs of investing in the fund, which typically include the management costs, 12-b-1-, operating costs, loads and other miscellaneous costs.

For specific information on each mutual fund and to retrieve the different ratios mentioned above, Yahoo Finance and Morningstar are my personal favorites.

Yuen is a financial expert, personal finance specialist and motivational speaker who writes for the Financial Freedom Guide and other major financial blogs. His writing emphasizes financial independence and the creation of long term residual income streams. Learn how to emulate his success at Site Build It Reviews.

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Stock Versus Mutual Funds - Safe or Sorry?

2008-09-02T04:13:00.001-07:00

It seems a little odd to compare stocks to mutual funds. Actually, mutual funds are largely composed of stocks. It is important to make the distinction between the two as there are some very real advantages to using mutual funds.

It is fun to invest in individual stocks because each company has its own story to tell. However, you want to focus on making money! Investing is not a game and should not be taken lightly.

When you invest in mutual funds, you are able to diversify and reduce your risk of losing money. Do you think that those wealthy investors out there just put their money in a couple of stocks? No! Either they are investing in mutual funds or are buying large numbers of stocks.

When you purchase mutual funds, you are hiring a professional manager at a relatively inexpensive price. It would be a little off the wall to think that you have more knowledge than a mutual fund manager! Most managers have been around the track a number of times and have the academic credentials to back up their knowledge.

Mutual fund companies have the advantage of capitalizing on economies of scale because they pool investors’ monies together. Since these companies have large amounts of money to invest, they usually have personal contacts at many brokerage firms and often trade commission-free.

Mutual funds are easy to take care of. The bookkeeper is much more challenged when there are hundreds of stocks to keep track of!

Mutual funds are very liquid. Put in your order for money in the morning if you are short on cash, and by the time the market closes you may have a check waiting for you. Stocks, on the other hand, are much more difficult. It all depends upon what you have invested in. CDs are not at all liquid and bonds are difficult as well.

If you are new to investing then mutual funds may be the way to go. You can invest small increments of money at regular intervals and not have to pay a trading cost. If you invest in stocks, you will find that they carry high transaction fees. This makes it quite difficult for the small investor to realize a profit.

If you are a wealthy stock investor, then you have it made because you get preferential treatment from the brokers. Wealthy bank account holders usually get the red carpet treatment from the banks. However, mutual funds do not discriminate. Whether you only have a paltry $50 or a huge sum of $500,000, you all get the same manager, the same investment and the same account access.

Generally speaking, mutual funds have a much lower risk than stocks. This is largely to diversification which was mentioned earlier. With stocks, there is always the worry that the company you are investing in will go belly up! With mutual funds, that is next to impossible.

As you can see, there are many advantages in investing in mutual funds over stocks. It is not to be said that you should never invest in stocks, but if you are just getting your feet wet with investing it would be best to go with mutual funds!

The Stock Market If you want to discover your pot of gold in the stock market, then you have to know it inside out. And for all the inside-out information on the stock market explained in simple, concise, layman terms, all you need to do is click on this link: Stocks Versus Mutual Funds. Learn How To Find stocks Which Will Double. Simple enough, huh?

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Which One is Better for Investing: Mutual Funds or Stocks

2008-08-25T22:12:00.001-07:00

Comparison between Mutual Funds and Stocks

Diversification

Mutual fund companies invest in a variety of stocks, bonds, and money-market investments, so mutual funds carry much lower risk than stocks.

Professional Management

Mutual funds enable investors to pool their money and place it under professional investment management. These managers have been around the industry for a long time and have the academic credentials to back it up.

Greater Upside Potential

Individual stocks have a greater upside potential than most mutual funds. Fluctuation in stocks is greater than mutual funds, so you have greater chance to earn more return.

Risk and Return

In general, Risk and return depend each other, the greater the risk, the higher the potential return; the lower the risk, the lower the expected return. Mutual funds try to reduce their risk by investing in a diversified group of individual stocks, bonds, or other securities.

Efficiency

Mutual funds have large sums of money to invest and often they trade commission-free and have personal contacts at the brokerage firms.

Conclusion

By investing in stocks you can get more return than mutual funds but, by investing in mutual funds your risk is lower. Mutual funds are great for funding retirement plans and investors that don't have the time or energy to consider individual stocks.

It is noticeable that most expert traders in stock market invest in mutual funds too. I recommend investing in both of mutual funds and stocks but, if you have experience, time and energy you can invest most of your money in individual stocks.

By Mostafa Soleimanzadeh. Investing in the Stock Market Tips, Learn how to Invest in Mutul Funds.

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Mutual Funds are not Investments

2008-08-25T22:12:00.000-07:00

Mutual funds simply are a method through which people invest. People often asking, "What are mutual funds paying?" The truth is that mutual funds don't pay anything! People also say, "I don't like mutual funds because they're risky." But there's no such thing as a "risky" fund. Nor has anyone ever lost money in a mutual fund. Mutual funds are not good, and they're not bad.
A mutual fund, in fact, is merely a mirror - a reflection of something else. Thus, if you invest in a mutual fund that invests in stocks, and you are as likely to make money or lose money as any other person who invests in stocks.
In fact, you can use mutual funds to buy virtually any kind of investment: stocks, bonds, government securities, real estate, gold and other precious metals, international securities, foreign currencies, natural resources, even hedge positions and money markets. You can find funds that engage in virtually any type of trading activity, including options and futures contracts, derivatives, and even selling short.
Technically, mutual funds are called "open-end" investment companies because they forever buy and sell their shares. In industry jargon, mutual funds "sell" shares to the public, and when you want your money back, the fund will "redeem" them for you.

About the author: Tony Reed is the author of " Mutual funds are not investments", please visit his website Mutual Funds & Stock Trading for more information.

This article is free for republishing as long as you leave the article title, author name, body and resource box intact (means NO changes) with the links made active.

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Investing In Mutual Funds For Youngsters

2008-08-04T22:31:00.002-07:00

Is your age anywhere between 18 and 35? Are you someone who just finished your graduation? Are you someone who just started your career?

If your answer is yes to those questions, then you must be thinking about investing some money for your future. Of course, retirement plans and pension plans are not for you. You must be thinking more aggressively! At the same time, you should be careful not to lose out. So what can be done? How do you get enough money for the next few years (reasonably fast) and not lose out?

One possible place where you can invest is in mutual funds. Of course, not every fund meets your objectives and shares your long (or short) term vision to generate money. Some of the possible types of funds that you can look to invest are the described in this article.

The Emerging Markets Funds

Emerging markets funds invest in economies that grow very fast (like India, China, Brazil, Russia, Mexico etc.). These economies create wealth both at home and also for foreign investors. These funds have posted impressive returns. Many funds have given more than 50% return. However, in the current world economic scenario, such returns may not be possible consistently for a long time. But these funds tend to diversify their portfolio across different countries and mitigate several risk factors. Hence investing in emerging markets funds is a quick way to earn money.

Small-cap and Mid-cap funds

These funds are for those people who tend to take more risk than an average investor. Recent history says that the small-cap and mid-cap have consistently outperformed large-cap stocks. But there is no guarantee that it may continue to do so in the future too. These funds concentrate on growth stocks and therefore have larger returns but the major drawback in such stocks is their volatility. Therefore it is always better to invest in small-cap and mid-cap funds for a smaller period of time. Investment should be made in funds that have a diversified portfolio and smaller asset base (it means that the fund has enough flexibility).

Target 20XX funds

If you are an adventurous person who wants to do a lot of things in life and at the same time see your money grow over a period of time, then target 20XX funds are the ones that you should be looking to invest. The portfolio of these funds will be biased in favour of equity to provide higher returns in the initial years. But over a period of time, it will be revised and more funds will be shifted to bonds to ensure safe returns before maturity. Hence these funds are the ideal foil for the passive investor who wants to have an adventurous life (or whatever) and get some money at a later date.

The Conditions For Growth of Good Stocks

2008-08-04T22:31:00.001-07:00

A smart investor is always on the look out for growth. Share prices are directly proportionate to the respective company's worth in the stock market. So, it is always wise to seek companies which are rising in value. When you hold on stocks of companies that manifest relentless growth, handsome stock market returns are achieved.

But in this aspect don't always focus on the projected growth rates. If all of a sudden the stock market start to lose faith in the said company's prospects, the result can be horrific.

The characteristics of the best growth stock are a combination of potential upward growth along with sizable safety margin. They ought to satisfy three conditions:

1. A good growth rate

It is preferable if the company has fast growth instead of a slow one when the rest of the factors are equal. This is because even the minute relative changes in growth rate can make a substantial difference to the investors.

2. Sustainability

Stretch your vision beyond the growth estimates. Not the 'estimate' but the 'sustainability' of growth is more important in order to achieve great returns. This is a common mistake done by even the clever growth investors. They focus so much on the growth rate that they stand to ignore the logical sustainability of that growth. This myopic vision is the prime reason behind the tech bubble. People get allured by the high growth projections but fail to notice that the company has negligible or few competitive advantages. When the bubble pops, the company disappears and the investors bite the dust.

3. A good price

Don't end up paying far too much for growth. It makes sense if occasionally you pay a hiked up price, because you can rely on the sustained growth of the company. But take care not to defy logical calculations that it makes virtually impossible for you to uphold even a marginal profit even in the situation where the growth is not hampered. It is a good idea to select a growth stock which is fairly priced or undervalued. A discounted cash flow (DCF) calculation will aid you to calculate the fair value of a growth company.

These three central ideas shouldn't lead you to think that value investment strategy is to look for unpopular penny stocks You need to look for growth stocks from strong companies that possess reasonable positive growth prospects. And when you get growth stocks at a reasonable price offering sustainable growth, you can rest assured about your long term profits.

Buying Options on Stock Splits

2008-08-04T22:31:00.000-07:00

In order to buy options on stock splits and to make the investments on these stocks worthwhile, it is imperative that a proper understanding of what stock splits are should be in order. Simply put, what is referred to as a stock split or a stock divide is the way in order to increase the number of shares in one company, but the market capitalization of the company remains and no dilutions happen in the process of the split. This can be best understood by way of an example. Say a company with 20 shares is priced at $10 each. If the company decides to do a 2-1 split, then there will be now 40 shares that are available to the company's stockholders. After the split, the price of each stock will be adjusted.

With the split, the cost of one stock stands at $5. Any ratio can be used by the company but the ratio that is usually used is the 2 for 1 split, the 3 for 1 split and the 3 for two splits. Some people will argue that with buying options on stock splits come higher stock prices. Research and experiences suggest that this isn't true. One good thing that can be done by splitting the stocks of one company is that this can increase the liquidity of the stock. In layman's terms, the stock will move better and stocks can exchange hands faster. Investors will snap up stocks that cost $ 5 dollars fast than stocks that cost $10 each.

If the effects of buying options on stock splits can't be substantiated by research and experience, then why do a number of investors buy options on stock splits? This could be explained by psychological factors.

For example if investors will expect and believe that stock splits can increase the price of shares, then stock prices may increase as well. Often stock splits can be a vote of confidence of the company, as a split can signify that the management of the company has confidence in the company's future. The stock split has a number of so-called stages. These stages include the pre-announcement, the announcement, the dormancy, the pre-split run, the split execution and the post split depression. The pre-announcement of the split will tend to have an impact on the stocks as stocks will climb faster than usual. The announcement of the split will usually be the time when the price of the stocks of the company jumps sharply. And the valuation of the stocks may increase for a period of time. After announcement of the stock split comes dormancy. This is the time when the price of the stock of the company will level off.

There are some instances when the stock of one company doesn't enter this phase as the price of stocks tend to increase some more. The split execution can be a great time to buy stocks on split as well. The post split depression is where the excitement tapers off. This is also the stage where the short sellers and who has low-risk opportunity to profit from the brief pull back. Most stocks will retreat after this time, but some will continue to post gains. This is the challenge to those who may want to engage in buying options on stock splits.

Don't Dread Filing Your Income Taxes - Money-Saving Strategies May Be Available!

2008-03-11T23:26:00.000-07:00

Many people groan at the word "taxes", and usually do so with good reason. First of all, having to pay taxes on an annual basis often presents a financial burden for people. Each time you examine your paycheck, you might feel abused or cheated, considering the withholding amounts of federal income tax (that's not even mentioning state taxes, Social Security or Medicare taxes).

Even though taxes can be boring and tedious remember that there are some tax regulations that may benefit you. Be aware of all the possible tax deductions that are available and see if you are qualified for any of them. There are some deductions that let you take some of your financial output off your reportable income and some give you the right to not report certain income at all.

Tax Credits and Tax Deductions

There are currently five tax areas where tax deductions and credits can be taken and receive special treatment under the US tax laws:

1. Tax-free income is money you get that you do not have to pay taxes on. Tax exclusions or exemptions are examples of tax-free income. Most of the time, you do not have to report items such as these to the IRS since it does not affect your tax calculations.

2. Capital gains are profits you get from selling or exchanging property that has been held for at least a year or more. These capital gains, which are considered long term, will be subject to reduced tax rates, in comparison with taxes for other types of income, like salary or income from interest. Regular stock dividends, as well as stock mutual funds, get taxed with the same lower rates as capital gains.

3. Tax-deferred income is not currently taxed, but will become taxable at a later date. You could accumulate a larger amount, as income is growing, without incurring taxation.

4. Tax deductions are payments or expenses that reduce your taxable income. There are two classes of deductions: "above the line" deductions are subtracted from gross income, and can only be claimed if you file an itemized statement rather than the standard deduction (which will be explained later).

5. Tax credits are used to offset taxes owed, usually in a dollar-for-dollar exchange. There are usually separate forms that need to be filled out when claiming tax credits.

You can get your taxes done easily and quickly, while decreasing the amount of your money that goes to Uncle Sam.

Stocks vs Mutual Funds

2008-03-02T21:47:00.000-08:00

Stocks have several pros and cons associated with them. Stocks are a great option if you know what companies you want to invest in. They are also a great option if you are interested in day trading. While stocks offer you flexibility and control over the diversity of your investment portfolio they require a lot of work to keep your portfolio properly diversified. A lot of financial experts recommend that your investment portfolio contain investments in at least 20 different companies and in at least 10 different industries. Making this many stock selections can be difficult to do.

Mutual funds are another investment option that you have. A mutual fund is basically an investment set that is controlled by a financial management company. This management company selects the stocks, bonds and other investments that are held by the mutual fund. Mutual Funds are a great way to easily diversify your investment portfolio. The management company does all of the leg work for you. While mutual funds are a great investment option they do have a few drawbacks. The first drawback is that they charge management fees and carrying fees. These fees cut into your profits and investment capital. The second drawback is that the performance of the mutual funds depends partially on the management company’s ability to select good investments and the company’s ability to manage the fund’s investment portfolio. Another drawback to mutual funds is that you don’t have any say in which investment products the mutual fund invests in. Because of this the fund may invest in a company that you would prefer not to invest in, or they may select an investment product that you think is a bad investment. Finally, mutual funds are susceptible to fraud. In recent years there has been several high profile fraud cases filed against mutual fund management companies.

The Problem With Hedge Funds

2008-03-02T21:45:00.000-08:00

Are hedge funds a suitable investment for you? Hedge funds are an appropriate investment for qualified purchasers with a net worth above one million dollars and an annual income exceeding two hundred and fifty thousand dollars. Purchasers are often required to sign an acknowledgement confirming their qualifications to invest in hedge funds. However, just because one is qualified to invest in a hedge fund doesn’t necessarily mean they should do so. There is a major problem with this type of investment. Oftentimes, the risk associated with the fund is misrepresented, leading to investors being misguided into skewing their qualifications.

The term “hedge fund” is a generic term used to describe many unique investments. Put simply, the phrase is derived from the purpose – hedging the risk of investing. Hedge funds provide lower long-term returns in exchange for less volatility. The form of investment is not new, but their popularity certainly is. The newfound popularity of hedge funds has left many investors wondering what they are all about.

To shed a little light on a decidedly illusive investment tool, a quick run down is necessary. A hedge fund is typically a privately organized pooled investment fund, predominately invested in publicly traded securities. They are normally created as limited partnerships, consisting of one general partner and up to one hundred limited partners. The general partner usually receives a management fee and 10-20% of the profits from the fund. The success or failure of a hedge fund is often dependant on the competency of the fund manager, since they are more aggressively managed and traded than traditional mutual funds.

It should be noted that hedge funds have a higher failure rate than traditional funds. Numerous hedge funds fail by the second or third year of operation. Also, hedge funds are less transparent than traditional funds because some hedge fund managers do not reveal the securities they hold, or the extent to which they are leveraged. Hedge funds may have a higher turnover rate and be less tax efficient than traditional funds.

Along with the aforementioned downfalls associated with hedge funds, several more negatives should be noted. The management and performance incentive fees charged by the hedge fund manager, together with the trading costs and administrative fees can quickly add up, making B share mutual funds seem like a bargain. As stated earlier, only “qualified” purchasers are eligible to invest in hedge funds, leaving many would-be investors out in the cold. And liquidity, if available, is limited to quarterly release, and even then, investors are left at the mercy of the hedge fund manager.

The bottom line is, when dealing with hedge funds, get educated about your investment before jumping in. Discuss the option, both pros and cons, with your dealer, and know what you are getting into.

Basics About Mutual Funds

2008-03-01T04:36:00.000-08:00

Mutual funds are good investment option if you are looking to meet your financial goals. The best part about mutual funds is that they are managed by investment professionals and the risk involved reduces as the funds invested in the mutual funds get diversified.

A company dealing in mutual funds invests your money in a variety of bonds, stocks, assets, securities and many other short-term investment instruments. You will earn dividends when a mutual fund earns profit and on the other hand, the value of your shares will decrease if the mutual fund company faces a loss. Usually a professional investment manager will do all the buying and selling on your behalf to ensure that you get the best returns for your investments.

There are different types of mutual funds, namely equity funds, fixed income funds and balanced funds.

Equity funds involve just common stock investments. They are extremely risky but can end up earning you a lot of money. Fixed income funds are government and corporate securities. Fixed income funds offer fixed returns and the risk associated with these funds is very low. Balanced mutual funds are a combination of bonds and stocks. These funds have a very low risk factor but your investment will not earn a lot of returns.

Mutual fund shares can be purchased either through the mutual fund company or from a broker. The mutual fund share is bought at the net asset value of the fund. This is the price you have to pay when you buy a mutual fund share and it includes the shareholder's fee.

The shares of a mutual fund are redeemable. You can sell your shares back to the broker or to another customer. Most mutual fund companies continue creating new shares and selling them so that they can accommodate new investors.

Basics About Mutual Funds

2008-03-01T04:34:00.000-08:00

Tax Credits and Tax Deductions

There are currently five tax areas where tax deductions and credits can be taken and receive special treatment under the US tax laws:

3. Tax-deferred income is not currently taxed, but will become taxable at a later date. You could accumulate a larger amount, as income is growing, without incurring taxation.

5. Tax credits are used to offset taxes owed, usually in a dollar-for-dollar exchange. There are usually separate forms that need to be filled out when claiming tax credits.

You can get your taxes done easily and quickly, while decreasing the amount of your money that goes to Uncle Sam.

Mutual Funds Basics

2008-02-26T02:16:00.000-08:00

There are a number of investment options available. Many people have chosen mutual funds as their primary means of investing. Mutual funds provide professional management, diversification, convenience and liquidity. As with all investments, mutual funds are not risk free. It is essential that you make an informed investment decision and choose a mutual fund which is right for you depending on your goals, investment time frame and risk tolerance.

Over the long-term, the success (or failure) of your investment in a fund also will depend on factors such as:

Fund's sales charges, fees, and expenses;
Taxes you may have to pay when you receive a distribution;
Age and size of the fund;
Fund's risks and volatility;
Recent changes in the fund's operations.

When you invest in a mutual fund, your money is combined or pooled with the money of other investors and used to purchase specific types of securities. Mutual funds are run by investment professionals who decide which investments to buy or sell for the fund. The professional picks from a wide variety of stocks, bonds, money market instruments, or other financial instruments. The investments selected will depend on the fund's investment objectives. That's why it's so important for you to choose a fund with objectives compatible with yours.

Generally, the success of your investments over time will depend largely on how much money you have invested in each of the major asset classes – stocks, bonds, and cash – rather than on the particular securities you hold. When choosing a mutual fund, you should consider how your interest in that fund affects the overall diversification of your investment portfolio. Maintaining a diversified and balanced portfolio is key to maintaining an acceptable level of risk.

The types of investments that a mutual fund holds, its investment goals, the fees charged, and information about who manages and advises the fund are described in a prospectus . You should receive and review a prospectus before investing.

Top Mutual Funds By Category - Info To Help You Find The Top Mutual Funds To Invest In

2008-02-25T02:50:00.000-08:00

There are many different websites that will offer information on the top mutual funds by category. Mutual funds are the best ways you can save for retirement.

You work so hard and yet if you do not save for rainy days, then what good is it? While choosing a mutual fund you should always check the returns it has given in the last five years or at least 3 years. Find out the top mutual funds by category and be with the winner.

It is important to understand mutual funds by category as there are different risks and rewards associated with it. As per the index there are different types of mutual funds ranging from small cap funds, Blue chip funds, mid cap funds, large cap funds and many more. These mutual funds are then further categorized by the way they yield returns to individuals. They can be global, growth, fixed income, mixed equity, core, and sector.

Listed below are the Top mutual funds by category

Global: Index of different countries would be the determining factor of such mutual funds performance. E.g. ishares: Brazil has given a return of 59.11% in the past 3 years; Fidelity Latin America (FLATX) has a return of 53.45%

Growth: One of the top mutual funds by category is growth. These are the most popular ones. CGM: Focus fund with a return of 31.46% over the past 3 yrs.

Mutual Funds To Invest In - Are They Safe?

2008-02-25T02:38:00.000-08:00

If you have considered investing with a mutual fund, you are not alone, millions of Americans are flocking to these open end mutual funds because they are recognizing the common sense of such a proposal.

Unlike hedge funds, Mutual Funds are very heavily regulated by the FTC making them a safe option for small investors. These work by pooling together many investors funds and controlling those funds to take advantage of opportunities that come about. Typically they will invest in stocks, bonds, and various security instruments, including even real estates and property like shopping centers or buildings. They tend to be very conservative with their choices however they are typically aggressive about getting in and out of investments. This means the return is usually quite good, depending on the fund.

The key point to remember when choosing a mutual fund is that past performance does not in any way indicate future results. Past performance can however indicate if the fund is consistent or not. It is wiser to avoid volatile funds that make large gains one year, then losses the next because this can indicate a measure of instability and risk taking. However, this must be a personal choice you make.

Also mutual funds are not guaranteed or insured by the FDIC or the government. Even if you bought the shares of your chosen fund from a bank, (which is insured by the government) they will typically be acting as brokers for the product and there banking status is not transfered to the product you purchase.

Understanding The Basics of Mutual Funds

2008-02-19T01:56:00.000-08:00

When investing in the stock market there are a growing number of ways to actually get your money in to play. Traditionally this involved buying individual shares of a company through one of the world’s many stock exchanges. With a mutual fund you are actually investing in a lot of companies while only putting your money in to one thing.

It is best referred to as a money pool. A mutual fund company has investors that buy shares and all of its investors’ money is gathered and then spread out in many smaller investments.

This is basically instant diversification. While an average investor can not afford to invest in more than a handful of stocks on their own, through a small investment in a mutual fund their relatively small amount of money is able to be spread out amongst hundreds of stocks.

By spreading out the money in all sorts of different investments the mutual fund has its hand in a variety of businesses and industries around the world. This means that even if one industry fails one year the other ones should pick up the slack.

This, of course, leads to the big misconception about mutual funds which is that they are guaranteed money. While they are more secure than most investments there is definitely no guarantee. Not only can mutual funds lose money year to year but when they earn money it is by no means certain to be a large amount of money.

Further more, because of the vast diversity of their investments, the returns a mutual fund earned one year is not really an indication that it is the right mutual fund for you to invest in. Anything can happen in the second year.

That said when choosing a mutual fund it is important to look at their history. It can tell you a lot about the fund and how they do business and, basically, if they seem to be making the right decisions with everyone’s money.

A strong downside to mutual funds though is that there are a lot of ongoing costs associated with them. Unlike investing through the government there are heavy taxes and fees virtually every step of the way.

First and foremost the mutual fund company will be taking a cut of the funds profits; that’s just a given. But also there is the ongoing cost of buying and selling stocks. Not only is the investor there to share in the earnings and losses of the overall fund, but they are responsible for paying their share of those fees the fund has to endure. Lastly there is often a charge to withdraw from the fund.

That last note though is also one of a mutual fund’s perks. Unlike some other forms of group investing, typically government connected ones, a mutual fund is relatively liquid. An investor can cash out virtually any time they wish.

Start Investing in Mutual Funds

2008-02-19T01:55:00.000-08:00

Haven’t you become a member of the large family of mutual fund investors yet? If you keep waiting you may never be able to feel the positive effects mutual funds have on your account. However, you are not the only one who has not managed to overcome some of the basic mental barriers that come in your way toward mutual fund investing.

First of all you may think that you don’t have enough money to invest in a mutual fund. However, as little as $100 can get you started in your trip to a rich mutual fund account, which will provide you with financially secure retirement. No trading costs exist when you invest in the majority of mutual funds, which allows you to invest small amounts of money. As compared to stock investing, the latter eats up a big portion of your money in terms of broker commissions and you end up with less money for investing.

On the other hand, you may be reluctant to invest in a mutual fund, because you find it non-guaranteed or non-insured. However, you should not be worried about the security of a mutual fund because it cannot go bankrupt. A mutual fund usually holds shares of a large number of companies and in order to go bankrupt all of these companies should altogether become insolvent. On the other hand, the insurance companies or bank accounts that are generally viewed as safer can easily go bankrupt and you will end up losing your hard-earned money. What is more, inflation tends to eat up the money you accumulate in your savings account, whereas your mutual fund account enjoys compounding interest.

You may also prefer not to invest in a mutual fund, because you believe you are better at selecting individual stocks. We don’t want to undervalue you stock picking skills, but by purchasing shares of a mutual fund, you immediately enjoy the professional management of your assets by experts that have been in this field for many years. You may really have success at times, but it is equal to your chances of winning in the lottery.

Additionally, many investors make the mistake to invest in the company they work for. This is totally wrong tactic, unless you include in your portfolio other stocks to diversify it. Mutual funds include stocks and bonds of many different companies, which is extremely beneficial in restful economic times.

Finally, most investors don’t want to invest in a mutual fund, because they are worried they don’t understand how it functions. The first step is to browse through our website and get all the information you need to get you started. We have made it easy to use and full of different articles on the subject so that we turn you into an educated and successful mutual fund investor.

What are the Best Business and Investment Opportunities?

2008-02-18T03:19:00.001-08:00

There are an almost limitless number of business opportunities available today. They include everything from sales, real estate, small business, home business, marketing, franchising, advertising, business services, internet business, etc. But many of them require a large investment. Many internet businesses only require an initial small investment, but many are not profitable. A lot of people have spent a large amount of time and money on businesses that failed. Some of the best business opportunities do not take a lot of time or money. Most of these are internet businesses. One of the best ways to make money on the internet is by becoming an affiliate with another internet business. ClickBank is one of these. With ClickBank you promote a product as an affiliate with an internet marketer. You will get a percentage for every referred customer sale.

There are many investment opportunities available: mutual funds, stocks, bonds, Treasury securities, savings bonds, variable annuities, commodities, commodity futures, options, Real Estate Investment Trusts (REITs), and a lot more. But, you need to trust the company that is making these investments on your behalf or you may lose money. Also, you need a substantial amount of money to produce a substantial profit. If you have money to invest, I would recommend either mutual funds or real estate.

To invest in mutual funds, find a reputable broker. I do not recommend using online brokers unless you have a great deal of knowledge and experience investing in stocks and mutual funds. Determine what kind of investor you are. Do you fit in the conservative, moderate, or aggressive category. A word to the wise though. Watch your funds to make sure they are performing well. Brokers will not call you if your funds are doing poorly.

To invest in real estate, find a reputable real estate agent. Buying houses to rent is an excellent way to boast your income. Make sure your down payment is enough so that you receive a positive cash flow from your rent after you subtract your mortgage payment, maintenance expenses, etc.

Why Would You Even Consider Mutual Funds?

2008-02-18T03:17:00.000-08:00

· In addition, corporate "road shows" stop off at various professional management offices to bring them up to date, but don't expect them to come knocking on your door. Finally, influential Wall Street professionals share their opinions first with large, commission-generating customers—like mutual fund managers.

· Instant Diversification: To achieve even bare-bones diversification on your own at a reasonable cost, you would need several hundred thousand dollars to invest.

· Low Costs: Funds charge management expense fees that approximate 50 to 75 basis points (.50 to .75 percent), and go as high as 75 to 150 basis points for some equity funds. If you stick to no-load funds that keep expenses low, however, you'll find that investing in mutual funds is a great deal cheaper than investing in stocks on your own and paying commissions and transaction costs. Some index mutual funds have expenses as low as 12 basis points (.12 percent). Try topping that!

· Terrific Variety: Whatever you want, the fund industry offers. Want to invest in Japanese companies? Health care? New Jersey municipal bonds? Indonesian utilities? There's a fund somewhere doing just that.

· Ease and Convenience: Usually, you can complete your transaction with one phone call and a bit of paperwork. And if you stay within a particular fund family, you can switch funds with no—or at the very least, minimal—expense, over the phone.

Mutual Funds - How To Pick A Winner

2008-02-13T02:33:00.001-08:00

There are a variety of things to look for in a mutual fund before you invest. As mentioned before, the stock market has averaged nearly 11% during the past 70 years. Depending on how aggressively you invest your money, I think you can generally count on a rate of return somewhere in the 10% - 12% range.

Now, what to look for in a mutual fund...

I usually recommend an index mutual fund for most of your investments. An index fund tracks a specific index, such as the S&P 500, which are the largest 500 stocks on the New York Stock Exchange (NYSE). Most index mutual funds do not have specific managers that are in charge of the fund, but rather are mostly automated in their day-to-day operations. If the fund does have a manager, it is important to note that he should have a long track record of good returns on that fund. If that manager or management team has only been with that fund for the past year or so, there is not much chance that the returns will continue to be what they have been over the past few years.

Another important number to look at is the expense ratio. It is fairly easy to find a fund with good returns and expenses less than 1%. The lower the better, but remember, if you buy a fund with an expense ratio of 1.5% that returns 12%, it would be better than a fund with expenses of .5% that returns 9%.

Usually I find that most people only care about one particular number; the past returns of a fund. While this is great information to be armed with, I always caution that past performance is no guarantee of future returns. That is especially true if a new manager is on the job.

An excellent website for free mutual fund research is Morningstar. In addition, they also have a free investor's classroom which contains some great information about not only mutual funds, but also stocks, bonds and other investments. In general, we suggest to start out small with a single mutual fund covering a broad range of the stock market, such as small and large companies as well as international stocks. When you have over $10,000 in investments, you can start branching out to ideally hold 25% in International, 25% in Aggressive mutual funds, 25% in Small companies, and 25% in large companies that pay dividends.