Posts Tagged ‘Funds’

Money Market Mutual Funds

Money Market Mutual Funds

Money market mutual funds are also known as principal stability investments and they are controlled by the Securities and Exchange Commission. They operate in such a way that they limit losses that are as a result of credit, market and liquidity instabilities. They have the highest rated debt in the United States and they come in the form of government securities and purchases agreement, short-term bonds among others.

Money market mutual funds are common with many banks in the United States. The banks normally offer high returns compared to other investment companies. They also provide liquidity and primary preservation which then translates to longer maturity, lower rated bonds and foreign currency denominated debt. Longer preservation means that the risk involved is much lower.

There are many different types of money market mutual funds. They include retail money fund, which are primarily offered to individuals and they hold about 35% of all money market investments. These investments deal with short-term debts, for example the US treasury bills and commercial paper. They are further sub-divided into government-only, non-governmental and tax-free investments. their advantage is that they bring along higher returns than most others.

Institutional money investments is another category which is characterized by high minimum investment and low expenses. They are commonly invested in by government corporations and fiduciaries. The largest institutional money investment companies include JPMorgan, BlackRock, Western Asset, Columbia, Dreyfus, AIM and Evergreen (Wachovia). To make a decision on which one to buy the investments from, you are advised to compare their rates of performance so as to make an informed decision.

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Are Money Market Funds Beneficial?

Are Money Market Funds Beneficial?

A possible solution to ease one’s tax burden is to opt for money market funds over money market accounts.  Though money market accounts generally return a good interest rate on your invested principal, money market funds help minimize taxes and further increasing capital appreciation.

If your situation is one where you are stuck paying high state taxes but are in low federal tax bracket, certain money market funds can help you.  Money market funds made up of U.S. Treasury bonds, such as the Vanguard Money Market Reserve U.S. Treasury Portfolio, can help you alleviate some of the burden caused by high state taxes.

Several brokerages also offer funds that are exempt from taxes at both the state and federal levels.  One example is the Fidelity Spartan Money Market Fund.   This fund is possible because it invests in securities that are exempt from federal as well as local taxes.

When we talk about an account being tax free, we are referring to the dividends that the fund pays out and not the initial principal.  That money is still subject to taxes, but all dividends earned on that money is tax free.

The interest rate a money market fund pays is dependent on the exact securities that the institution invests in.  Most financial institutions invest into the same basic types of securities, often bonds, and therefore the interest rate usually vary only slightly.

If your tax situation is a primary investment concern, consider switching from a standard money market account to something better suited to tax management, money market funds.  You work hard for your money.  Why not do all you can to keep it for yourself?

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7 Best Mutual Funds for 2009

7 Best Mutual Funds for 2009

As our economic outlook continues to be poor and as the stock market is in turmoil, stock investing has become increasingly difficult. Maintaining a solid investment portfolio can be hard work. One alternative to the difficult work of stock selection is to invest in mutual funds. With thousands of mutual funds to choose from, how can you tell which ones are the best?

That’s why I have compiled a list of the 7 Best Mutual Funds for 2009. After researching the performance, stability, and income of hundreds of top-rated funds, I found the best mutual funds to invest in for 2009 and beyond.

Income-Dividends
One part of my selection process was to find mutual funds with cash flow, either through dividends or bond interest payments (in the form of dividends for mutual funds). This factor is becoming ever more important during a time when stocks continue to decline. Through dividends you can know that you will have an income of the yield percentage.

Future Trends
Another selection criteria was to find mutual funds that are going to perform well for years to come. As you will see, I have included a mutual fund that invests in stocks of alternative energy or “green” companies. The whole environmentally-friendly, green movement is just getting started and will be a boon to the economy for the next 10-20 years. One aspect that is somewhat more of a near-term strategy is the gold focused fund because of the predicted rise in the price of gold over the next year or two.

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Long-Term Performance
The last and most important selection criteria was the long-term performance of the mutual fund. Any one stock or mutual fund can perform well over one or two years by luck, but it takes true skill to manage a portfolio that has good returns over a ten year period. A major failure of many investors that buy mutual funds is that they chase the fund that is currently performing the best or just recently had its best year. If the mutual fund is having an unbelievably great year, then either stay away from it because it’s too late or sell it if you own it.

The 7 Best Mutual Funds for 2009:

1. American Century High-Yield Fund (AHYVX)

– With the current state of the economy, your best bet for making money is finding an investment with a stated income (i.e. dividends, bond interest payments). American Century’s High Yield Fund has a dividend yield of 9.38%, which is much larger than most high yielding mutual funds or stocks.

2. The New Alternatives Fund (NALFX)

– this is the perfect mutual fund for times when people and companies are looking for environmentally-friendly ways of doing things. This mutual fund invests in companies that focus on renewable energy sources, as well as companies that are concerned with energy conservation and environmental protection. Over the next decade green and alternative energy stocks will most likely sky-rocket with gaining popularity and necessity.

3. Franklin Utilities Fund (FKUTX)

– A utilities fund is also a great way to get a flow of decent income during a time of poor stock performance. This mutual fund has a dividend yield of 4% and a 10-year annualized return of 5.17%, which is very impressive. Utility companies are a solid investment for having a stream of dividend income.

4. ING Corporate Leaders Trust Fund (LEXCX)

– Although its 10-year annualized return has been hurt by the recent stock market downturn putting it at 3.67% (which is better than all but two main value strategy mutual funds), ING’s fund has performed 10% better than the S&P 500 over the past year. It also has a dividend yield of 2.46%.

5. Franklin Gold and Precious Metals (FKRCX)

– This mutual fund has been a top performer over the past decade with a 10-year annualized return of 14.42% and a current dividend yield of 8.34%. This mutual fund has performed amazingly, and it will continue to perform with gold becoming more of a flight-to-safety investment for investors.

6. Vanguard Energy Fund (VGENX)

– although the commodities boom of earlier this year has faded, oil prices will come back. It is only a matter of time. Vanguard’s Energy Fund has had a 10-year annualized return of 14.81%, which is better than most mutual funds of any kind. It is positioned to perform well over the next few years.

7. Municipal Bond Fund (of your choice)

– municipal bond rates have gone up in recent months and continue to be a great source of extra income. For example, some bonds in Florida are paying 6% a year in interest. Remember with municipal bonds that interest payments are tax-exempt; just make sure you pick a bond that is within your state (otherwise interest payments become taxable). How does a tax-free income of 5% or 6% on your investment sound for 2009- with the U.S. still in recession?

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What Are Money Market Funds?

What Are Money Market Funds?

Ever wondered what money market funds are and how they can help you make the most out of your money?

Well, money market funds are fixed, short term investments in low risk holdings or securities. By law money market funds must invest in low risk mutual funds making them a good way for existing investors to diversify their interests or for newcomers to launch themselves into the marketplace.

Choosing a Money Market Fund
Money market funds can generate returns in a relatively short time span in accordance with interest rates, and can be redeemed at any time, which is why they are an ideal low risk option for people wanting to preserve their money in a volatile market.

These money market funds are essentially part of a mutual fund which invests in such things as government securities and low risk stocks and bonds. However, because money market funds are part of mutual funds they are not secured investments and are therefore not insured to cover losses.

Losses in the money market are rare as money market shares are able to consistently maintain a net asset value of .00 per share. The net asset value of a share is usually determined at the end of a trading day and it is only when investments perform very poorly that the value will drop below .00.

Investing In Money Market Funds
Some money market mutual funds can offer tax exemptions by investing in short term debts. However, before investing make sure you work out your final tax obligations.

In order to find the best mutual funds you need to consider how the investment can work for you. For example, money market funds all have a ranking in the marketplace so be sure to do your research and find out where they sit.

The next step is to work out how much money you have to invest as this will determine the best mutual funds to help you establish the portfolio you are after. There are money market directories that can be used to compare different funds and calculate expected risks.

You also need to be aware of the rates and charges that come with money market funds. Although these will differ between funds, most incur an initial sales fee, ongoing management fees and transaction fees. To be competitive money market funds will offer different packages for different classes of investors. Some packages may include a flat rate advisory fee while others will incur a fee that decreases as your portfolio value increases. Fees can also be allocated according to the value of a group of funds instead of a single fund.

Finding the Best Mutual Fund
Money market funds require compulsory professional management, undertaken by third party mutual fund managers. This means control of your fund is put into the hands of your fund manager, another reason to ensure you are choosing the right money market fund.

Mutual fund managers research different investment options and have the power to buy, sell and trade your funds on the market. A skilled fund manager will have the ability to forecast the financial viability of a certain asset or investment and make adjustments in accordance with the fund’s set financial principals.

Another major role of mutual fund managers is to predict the financial situation of the fund itself. This means managers need to calculate how much money will be entering and exiting the fund through investors in order to plan for future investments.

Like any investments, money market funds can have both positive and negative returns, but at all costs are the most low risk way of investing your money into the marketplace.

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On Stocks and Money Market Funds

On Stocks and Money Market Funds

There are obvious reasons why you, as an investor, put your money in the stock market. High return on investment is the answer. But are you sure that your invested money will reap as much profits as you have surmised? Well, it can be the other side of the story too, i.e., you may incur losses getting your expectation levels doused. Therefore, it is necessary that you know what is happening in the live stock market. You should be sensible enough to choose potential stocks from the chart of the most active stocks displayed in the live stock market.

It is not only stocks but also money market funds that have emerged as popular investment products. Risk is no doubt there in every investment product, but in this segment there is less risk. Just choose the right company and go into the details where your mutual fund money is going to be utilized. If it is an emerging sector such as infrastructure, real estate, etc., gaining is certain. Investing in money market funds involves a certain time period, say for few months to several years. Once your agreed period is over, you will get the returns and utilize the amount further.

Ever since the stock trading phenomenon started in India there has been a continuous tug of war between investors and the market. This is because of the lack of balance in reaping profits. There are lakhs who have made money to their satisfaction with more than the same number facing losses and bearing the brunt of financial crunch. Why is this imbalance? Well, it is expertise that matters. Even expertise fails at times. If you just blindly involve in trading in the stock market without taking into consideration the factors that govern it, you are bound to face losses. To win, you need to take cautious decisions in selecting stocks keeping market fluctuations in mind. If you visit any financial/business news portal or a stock broking platform, you can view the live stock market besides having a glance at the most active stocks and various stock related information and thus take the right decision.

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Mutual Funds – An Introduction and Brief History

Mutual Funds – An Introduction and Brief History

Each one of us does not have the expertise or the time to build and manage an investment portfolio. There is an excellent alternative available – mutual funds.

A mutual fund is an investment intermediary by which people can pool their money and invest it according to a predetermined objective.

Each investor of the mutual fund gets a share of the pool proportionate to the initial investment that he makes. The capital of the mutual fund is divided into shares or units and investors get a number of units proportionate to their investment.

The investment objective of the mutual fund is always decided beforehand. Mutual funds invest in bonds, stocks, money-market instruments, real estate, commodities or other investments or many times a combination of any of these.

The details regarding the funds’ policies, objectives, charges, services etc are all available in the fund’s prospectus and every investor should go through the prospectus before investing in a mutual fund.

The investment decisions for the pool capital are made by a fund manager (or managers). The fund manager decides what securities are to be bought and in what quantity.

The value of units changes with change in aggregate value of the investments made by the mutual fund.

The value of each share or unit of the mutual fund is called NAV (Net Asset Value).

Different funds have different risk – reward profile. A mutual fund that invests in stocks is a greater risk investment than a mutual fund that invests in government bonds. The value of stocks can go down resulting in a loss for the investor, but money invested in bonds is safe (unless the Government defaults – which is rare.) At the same time the greater risk in stocks also presents an opportunity for higher returns. Stocks can go up to any limit, but returns from government bonds are limited to the interest rate offered by the government.

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History of Mutual Funds:

The first “pooling of money” for investments was done in 1774. After the 1772-1773 financial crisis, a Dutch merchant Adriaan van Ketwich invited investors to come together to form an investment trust. The goal of the trust was to lower risks involved in investing by providing diversification to the small investors. The funds invested in various European countries such as Austria, Denmark and Spain. The investments were mainly in bonds and equity formed a small portion. The trust was names Eendragt Maakt Magt, which meant “Unity Creates Strength”.

The fund had many features that attracted investors:

It had an embedded lottery.

There was an assured 4% dividend, which was slightly less than the average rates prevalent at that time. Thus the interest income exceeded the required payouts and the difference was converted to a cash reserve.

The cash reserve was utilized to retire a few shares annually at 10% premium and hence the remaining shares earned a higher interest. Thus the cash reserve kept increasing over time – further accelerating share redemption.

The trust was to be dissolved at the end of 25 years and the capital was to be divided among the remaining investors.

However a war with England led to many bonds defaulting. Due to the decrease in investment income, share redemption was suspended in 1782 and later the interest payments were lowered too. The fund was no longer attractive for investors and faded away.

After evolving in Europe for a few years, the idea of mutual funds reached the US at the end if nineteenth century. In the year 1893, the first closed-end fund was formed. It was named the “The Boston Personal Property Trust.”

The Alexander Fund in Philadelphia was the first step towards open-end funds. It was established in 1907 and had new issues every six months. Investors were allowed to make redemptions.

The first true open-end fund was the Massachusetts Investors’ Trust of Boston. Formed in the year 1924, it went public in 1928. 1928 also saw the emergence of first balanced fund – The Wellington Fund that invested in both stocks and bonds.

The concept of Index based funds was given by William Fouse and John McQuown of the Wells Fargo Bank in 1971. Based on their concept, John Bogle launched the first retail Index Fund in 1976. It was called the First Index Investment Trust. It is now known as the Vanguard 500 Index Fund. It crossed 100 billion dollars in assets in November 2000 and became the World’s largest fund.

Today mutual funds have come a long way. Nearly one in two households in the US invests in mutual funds. The popularity of mutual funds is also soaring in developing economies like India. They have become the preferred investment route for many investors, who value the unique combination of diversification, low costs and simplicity provided by the funds.

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Kansas city lasik Paying for Money Market Funds Is ideal

Kansas city lasik Paying for Money Market Funds Is ideal

Dealing is definitely artwork. Buying and selling to the extent as to not eliminate money is a skill worthwhile cherishing. Not all are giving along with such a abilitie. However, it really is superior (at a minimum couple of years) to invest your own money so that you can get involved in an individual’s economy’s emergence (along with invest an item to barefoot jogging).

Therefore how does one expend your main money so that you will never lose just anything regardless of what function as the market predicament? Interesting is look for investment advice through mutual funds. Purchasing mutual funds supplies health and safety and also makes certain return. Together with within the actual mutual funds, few more suitable to go for money market funds. There’s almost never become a venture capitalist owning lost money over these funds!

What is a Money market fund?

A fabulous money market fund is a kind of mutual fund which is recommended legally obtain inside low-risk stock options. These kind of funds currently have really small challenges when compared to various other mutual funds and pay for returns that will mostly mirror short-term mortgage levels. Nonetheless, nothing like some sort of “money market saving account” in the financial institution, money market funds are far from insured federally.

Money market funds are governed mainly it is in the Expenditure Enterprise Respond of 1940 also, the guidelines put into practice underneath of which Work, specially Value 2a-7 within the Conduct yourself.

Rapidly these types of funds offer you money?

That past record worth mentioning funds basically involves governing administration sec, industrial scribblings about well liked agencies, records from build up as well low-risk investments within the money market. These kinds of funds basically put money into securities which use large liquidity. Some of these funds make an effort to practical Goal Software Price (NAV), that is definitely the significance that you purchase whenever you offer for sale a printer for the fund, that should be continuing. Then again, a provide would shift vertical.

So what more for instance secure?

Money market funds are very aqueous. They can be quite simply transformed into profit. It has the as a lodge inside of a bank or investment company. Prospects appearance very much like that will, the vast majority of money-market funds need sanctioned check-writing ability. You’re able to produce a check mark on your money-market fund and then simply afford whatever you want. For this reason they’ve been a sexy levels of competition at the finance institutions!

Varieties of money-market funds

There are numerous forms of money-market funds. One of the more typical model will be Treasury-only funds. These funds commit exclusively within a state treasury monthly dues and additionally treasury bonds. The safest type of fund. An additional favorite design is definitely the Government-only funds. Most of these funds buy all of types of lawmakers stock options which include financial debt through gov departments. Staff some of these there are a number funds prefer leading funds, first-tier funds and many more. The most popular any company name, every one of these funds are regarding premium quality all of which will promise to keep their NAV set it doesn’t matter what transpires with virtually any market for the overall design.

Can’t you must carry out well before purchasing a money-market fund can be to punctiliously browse every one of the fund’s on the market data, for example her prospectus, or else profile generally if the fund seems to have just one, and also its particular new shareholder file. Nevertheless this is really safe.

Learn about money market fund definition, analysis the prime money market fund rates include government and tax exempt money market funds list, at www.topmoneymarketfund.com  to find the best high yields money market mutual funds.

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Are Money Market Funds For You?

Are Money Market Funds For You?

Money market funds are one of the most popular cash management tools. These investments are also touted as the safest type of mutual fund. But before investing in them, you should first know what they are, their benefits, and if they are suitable investments for you.

What Money Market Funds Are

Money market funds are mutual funds that invest in money or financial markets, which, in simple terms, means that you borrow or loan money, respectively. A money market fund is similar to your deposit account at the bank in that it takes your money and uses it for investment purposes. Then, a portion of the earnings, which come in the form of dividends, are paid to you. In general, money market funds pay out monthly dividends.

Money market funds typically invest in short term investments that mature in less than 13 months at the maximum. Since money market funds are investment with shorter time frame, the risk is significantly reduced. The idea is that lending the money for the short term is safer as there is a high probability that the amount will be paid back. Normally, money market funds invest in US Treasury issues, short-term corporate paper, and certificates of deposit. There are different kinds of money market funds based on the type of securities they buy. However, the most significant distinction is whether the dividends earned are taxable or tax-free.

The Advantages of Money Market Funds

With this type of investment, you are allowed to write checks that draw from a money market fund. This allows you to enjoy the benefits of dividend earnings, plus you can easily access your cash. However, you need to verify with your institution first regarding restrictions and fees.

Money market funds are most practical for parking cash you need in the short term. These needs may include down payment for a house, a car or a vacation. Also, since money market funds are completely liquid, you can sell your shares in a money fund anytime you want to.

Who Invests in Money Market Funds

Money market funds are for investors who want to earn decent returns from safe investments. These investments are usually liquid. This means that you have the privilege of drawing out the money within a few business days if you need to. Money market funds also allow you to take advantage of increasing interest rates. This is made possible by stashing your money in an investment that adjusts with the movements of the market.

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Investing in Money Market Cash Funds – are They a Wise Option?

Investing in Money Market Cash Funds – are They a Wise Option?

When it comes to investing your money, you’ll probably know by now that you have numerous options to choose from.

In fact, it can feel like a bit of a minefield and sometimes you may not know if you’ve made the right choice.

Should you choose a bond fund, equity fund, property fund or a money market cash fund? Or any other type of fund?

So, what is a Money Market fund?

They are essentially unit trusts that aim to provide investors with an income from risk-free, short-term cash and cash-like holdings.

Some investors have been selling their share funds and have opted for security by pouring millions into these types of funds. In our experience, this type of investor will tend not to have a proper risk assessed portfolio, rather a collection of disparate investments, and may be doing it all themselves.

The money manager of their choice will place this money into bank deposits, certificates of deposit*, very short-term fixed interest securities and floating rate notes**.

Most Money Market funds require relatively low minimum investments – typically around £500. They are also quite low-charging, typically with no initial charges and an annual management fee between 0.25% and 0.50%.

So, in short, these funds are cheap, accessible and low risk. In these turbulent investment times, what could be better?

However, if you are paying an annual fee for a Money Market fund, it would be reasonable to expect that the fund manager would beat the return available from conventional, high street savings accounts.

Unfortunately, most Money Market funds aren’t performing better than traditional savings accounts!

Just take a look at their track record performance:

1 year – 3.8%

5 Year – 15.7%

10 Year – 41.2%

Put simply, leading savings deposit accounts would do similar or better!

So what is going on here?

The problem is that some funds are taking more risk than others, which drags the averages down. Conventional Money Market funds invest in deposit accounts and short-term, high-quality debt. But, lately, some funds have taken to investing in riskier assets such as lower-grade corporate (company) debt and longer-term loans.

The idea of course is to generate a better return. The downside is that defaults are occurring more frequently and with less liquidity (yet another repercussion of the credit crunch).

As an example, one leading fund has actually produced a negative (-3.9%) return over a year. This is worrying, since these funds are supposed to protect your capital.

So, taking the scope of returns into account, these funds actually seem quite expensive in terms of running charges. What’s more, the investment strategy of some funds is hardly low-risk and consequently are all exposed to some degree of market volatility.

In addition, it is difficult to determine the quality of the debt instruments your money is being invested in. US Funds have been feeling the impact of the subprime debt crisis for some time now, with falling interest rates putting pressure on returns. So the question is; will it soon be a similar story in the UK?

Since there are a number of market-leading, easy access savings accounts that are paying interest rates of 6 – 6.5% without any market risk at all, then if you are going to invest in a Money Market Fund, on paper it may NOT be the best option for your money.

* Certificates of deposit = A time deposit (i.e. a deposit with a specified maturity) made at a bank which pays fixed or floating rates of interest. The lender receives a certificate that a deposit has been made which can then be sold in the secondary market whenever cash is needed.

** Floating Rate Notes = Bonds and other debt instruments that carry a variable (i.e. floating) rate of interest, usually linked to a reference rate such as the LIBOR.

# Source: Investment Management Association, IMA. March 2008.

The Financial Tips Bottom Line

We have written many articles on the folly of ‘jumping ship’ and having no clear investment philosophy.

It really can’t be stressed enough – be an investor, not a gambler.

ACTION POINT

If you have a Money Market Fund, review this urgently. Contact your planner or adviser, and ensure you are getting the most from your investments.

Assured returns and total safety – money market funds

Assured returns and total safety – money market funds

Investing is a skill and a talent worth cherishing if one knows how to invest in a way so as no money is lost. The skill bearers are often blessed with an intuitive foresight that enables them to make decisions in their own benefits however, even those who do not possess the same skill need to invest their money in order to take part in their country’s economic growth. Now such people invest in the mutual funds as they provide safety assuring money return too. Amongst all the mutual finds, money market funds are the most preferred ones as till date their has been no investor who has faced a situation of loss by investing in them. Regulated under the investment company act of 1940, a money market fund has relatively lower risks attached to it besides it fetches dividends which generally reflect short term rates. As per the fund news, a majority of people go in for the money market funds as their portfolio combines of a host of features which encompass government securities, certificates of deposits, commercial papers of highly rated companies and other low risk securities in the stock market. Generally their investment is directed towards securities possessing high liquidity. While one aim remains to maintain the Net asset Value (NAV) intact, the money market funds derive yields which constantly go up and down.  

Fund investing in India is rather a more or less of gambling though reasonable. And money market funds play a vital role to generate investing opportunities for those who are not ready to gamble with their fortunes as these funds are extremely liquid. No wonder, they are just like a safe-deposit in the bank that can be converted into cash any given point of time. This is what makes them a strong competitor to the banks. Even if we check the daily equity mutual fund news, we would come to know of the most common and safest money market fund, the treasury-only funds. The other type spells government-only funds and then many other types follow like prime funds, first-tier funds and so on.

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