Finance Tips

Mutual funds pool money from investors, who are constantly saving into the fund and at the same time, others are withdrawing from the fund, forcing the investment managers to keep large sums of money as liquid cash. This is one disadvantage of a mutual fund because, keeping liquid cash is detrimental to the growth of a portfolio since, it ties the money. The money is not invested in productive endeavors, thereby reducing the benefits that could have been accrued.

The various fees charged include shareholders fees, which come in the form of loads and redemption fees. Loads are divided into front load fund, back load fund, constant load fund as well as no load fund, calculated as a percentage of the amount of stock you wish to buy or sell. Annual fund operating fees include the cost of keeping shareholders records and financial statements, marketing and advertisement fees. As an investor who is only starting out on investment, it would be wise if you could start up with funds that have low investment requirements. Continue reading ‘These Are Some Of The Disavantages Of Mutual Funds’ »

Investment securities have come a long way and they have a very long history. Mutual funds in particular have been in existence for such a long time that there is now only speculation about their date of inception into the stock market. They are believed to have been launched in 1822 by King Williams in the Netherlands.

King Williams is believed to have begun a pool of funds with the aim of bringing business people together to enlarge their investment prospective. His idea was right and it has now given birth to so many types of securities under mutual funds. They have performed well over the years and more is yet to come because more and more people are investing in them each day.

The idea of pooling resources spread across Great Britain and France in the early 1840s. Close to the end of this century, the mutual funds had become a common phenomenon in Scotland, Switzerland and the United States. In the US, the growth of the funds was propelled by the establishment of The Boston Property Trust, which was formed in 1893. With time, modern ways of investing and managing the pool came up and this is when the Alexander fund was formed. Continue reading ‘Mutual Funds History’ »

Stocks come in many categories, all characterized by differing benefits, returns and risk capacity. Buying them for the first time is not an easy affair for many people and as such, they need guidelines on how to value and choose stocks. Many times, what you choose to buy based on categorization is a reflection of who you are and what your mental processes are like.

An optimistic person is likely to go for growth stocks for example. These are investments that are likely to increase sales by at least 15% within a period of one year. Someone who has a lot of patience may choose to go for value stocks, which are believed to be able to beat all unfavorable market conditions. Well, these are just two of the three major categories that investors may choose from. The third category is that of income stocks, which is the most common among many people. Investment in this category is purely for the purpose of getting returns on the investment.

Pricing of stocks is a process that is mostly based on ratios. The ratios try to compare the relationship between prices of an investment and the company’s index. There are different ratios that can be used, but the most common one is the price to earning ratio. The price is divided by the return per share over a period of 12 months. Continue reading ‘How to Value and Choose Stocks’ »

The investment world is full of different securities which an investor may choose from. The securities fall under different pools, among them are the mutual funds. These are pools of investment that attract many investors for mutual returns that are then divided among the investors. An investor need to be aware of how the funds operate so that he can know when to expect his returns, or the rights he has on his investment.

Commodity mutual funds refer to a type of security that invests in commodity goods that are fast moving and which have the potential to attract good returns. In America today, there two firms that major in commodity funds. These are Oppenheimer Real Estate Fund and the Pimco Commodity real return fund. They were started a number of years ago and they have continued to thrive in the market today.

Commodity mutual funds are further categorized into two; the hedge funds and the commodity pools that are not open to a majority of investors. One advantage that an investor can draw from these securities is that, they tend to beat inflation. This is because the prices of commodities tend to increase with inflation. As such, they are able to fetch more from the general market. They are considered to perform more than stocks and bonds. Continue reading ‘Commodity Mutual Funds’ »

A mutual fund investment involves buying into a wide variety of options that range from individual bonds, stocks and other money market securities. Buy owning shares in a mutual fund investment, rather than individual stocks and bonds, your risk is widely spread out among the portfolios that the investment managers decide to invest in, making your investment even more secure.

This kind of risk spreading is referred to as diversification. Since each option class behaves in a different way, depending on the prevailing market conditions, when one of the securities decline, the losses incurred are balanced by the gains of the other. One arrangement that has always worked for me has been, buying stocks and bonds from the retail sector and offsetting any gains or losses with options in the industrial sector. I make sure i balance the different capitalizations available from the different sectors with the time the bonds will take to mature and vice versa.

Since diversification of mutual funds entails mixing of both retail and industrial sector options, you will reduce the impact in terms of performance of any one portfolio. You will not notice sharp hikes and big falls, what you get will be evenly spread out. Both large and small time investors should always strife to achieve this kind of asset diversification and allocation in order to minimize losses. Continue reading ‘The Idea Behind Diversification Of Mutual Funds’ »

One of the advantages of mutual funds is the fact that they allow for the diversification of your investment portfolio. Many investors pool resources in a mutual fund investment for the sole purpose of making profits. However, in order to avoid losses, the investors put their money into sectors that are not related, such that, when one investment goes down, its effect on the overall performance of the portfolio is balanced by the one that will make profit, or the one one that will stay stable.

As an investor, in order for to diversify your investment, you need to invest your money in a wide range of investment options ranging from stocks, bonds, money market securities to real estate and business opportunities. This is made possible through investment in mutual funds, where managers of the fund monitor and measure the performance of the pool against the odds that face the investment. These managers, do these by allocating part of the resources available to stocks, part to bonds and part to real estate among other investments. Continue reading ‘Advantages Of Diversification In A Mutual Funds Investment’ »