Let’s first understand what maniac means. According to Webster a maniac is “mad; raging with madness; raging with disordered intellect”. You don’t know anyone like that, do you?
There is a book that is still in print today that was originally published in 1841 with the title Extraordinary and Popular Delusions of Crowds by Charles Mackay. He explains in rather horrific detail how people were caught up in the madness of buying property in the South Seas in 1720, the numismatic coin craze of 1980 and the tulip bulb trading in 1637. You wonder how people could have been so gullible to have bought a single tulip bulb or land they would never see for huge amounts of money. Could anything like this ever happen again?
I was floor trader on the commodity exchange in 1973 when the Hunt brothers drove silver from $2.00 per ounce to $54. That mania lasted a few months and quickly tanked to $6.00. I took part in that mania. I was one of the maniacs.
When it was taking place it seemed like the thing to do and very few questioned the sanity of those participating. In fact, if you weren’t part of the crowd there was something wrong with you. When there is a stampede it is best to run with the herd or be trampled to death. However, there were a few who were not mesmerized.
Today we are participating in one of those manias only now it is called a bubble and still is not being taken too seriously. Yes, it is the stock market mania. Many are still trapped in the madness of the crowd of the 1990’s who believe the “market always comes back”. They are clutching their tulip bulbs, sorry, stock certificates, and refuse to let go of them because they know their value will grow back to what it was 3 years ago. Stock owners have become mad with what – greed? fear? denial?
When something, almost anything, drops 50% in price it will take a 100% increase in value to get back to “even”. With today’s economic and world conditions that could be a long time and maybe not in our lifetime.
Years ago I heard a story about how they used to catch monkeys. A small hole just big enough for the monkey to slip his empty hand inside would be drilled in a coconut and candy and fruit would be put in it. The coconut was tied to a stake in the ground. When the monkey grabbed a fistful of goodies he would not let go even when the hunter came for him. Greed holds him in an invisible grip.
Many investors today are like those monkeys. They refuse to sell what is remaining of the stocks and mutual funds they own even though they can clearly see the major trend continues down. They became mad with greed and now fear of loss entraps them.
Until this madness is recognized investors will continue to see their portfolios become smaller and smaller. They must learn to let go.Let’s first understand what maniac means. According to Webster a maniac is “mad; raging with madness; raging with disordered intellect”. You don’t know anyone like that, do you?
There is a book that is still in print today that was originally published in 1841 with the title Extraordinary and Popular Delusions of Crowds by Charles Mackay. He explains in rather horrific detail how people were caught up in the madness of buying property in the South Seas in 1720, the numismatic coin craze of 1980 and the tulip bulb trading in 1637. You wonder how people could have been so gullible to have bought a single tulip bulb or land they would never see for huge amounts of money. Could anything like this ever happen again?
I was floor trader on the commodity exchange in 1973 when the Hunt brothers drove silver from $2.00 per ounce to $54. That mania lasted a few months and quickly tanked to $6.00. I took part in that mania. I was one of the maniacs.
When it was taking place it seemed like the thing to do and very few questioned the sanity of those participating. In fact, if you weren’t part of the crowd there was something wrong with you. When there is a stampede it is best to run with the herd or be trampled to death. However, there were a few who were not mesmerized.
Today we are participating in one of those manias only now it is called a bubble and still is not being taken too seriously. Yes, it is the stock market mania. Many are still trapped in the madness of the crowd of the 1990’s who believe the “market always comes back”. They are clutching their tulip bulbs, sorry, stock certificates, and refuse to let go of them because they know their value will grow back to what it was 3 years ago. Stock owners have become mad with what – greed? fear? denial?
When something, almost anything, drops 50% in price it will take a 100% increase in value to get back to “even”. With today’s economic and world conditions that could be a long time and maybe not in our lifetime.
Years ago I heard a story about how they used to catch monkeys. A small hole just big enough for the monkey to slip his empty hand inside would be drilled in a coconut and candy and fruit would be put in it. The coconut was tied to a stake in the ground. When the monkey grabbed a fistful of goodies he would not let go even when the hunter came for him. Greed holds him in an invisible grip.
Many investors today are like those monkeys. They refuse to sell what is remaining of the stocks and mutual funds they own even though they can clearly see the major trend continues down. They became mad with greed and now fear of loss entraps them.
Until this madness is recognized investors will continue to see their portfolios become smaller and smaller. They must learn to let go.
Sunday, October 18, 2009
Tuesday, March 31, 2009
Mutual Funds - Tips For Choosing the Right Funds For You
What is the right type of mutual fund for you? Theoretically, a mutual fund could contain any type of publicly traded market investment and sell you shares in it. But mutual funds typically are made up of shares of stocks, money market securities, REITs (real estate investment trusts), bonds or a combinations of these investment vehicles.
So how do you choose one that's right for you? As with choosing stocks, you have to take a look at your personal investment goals and your risk tolerance.
Many people think that buying shares in a mutual funds is automatically less risky than buying shares of individual stocks. But that is not necessarily true. Buying any security poses some amount of risk, which is why there are such lengthy written disclosures given to you before you spend your money.
Analyzing you investment goals involves knowing whether you want long term or short term growth, or ongoing dividend income. And you need to be able to accurately assess your risk tolerance. This is another way of asking how much you could afford to lose and how well could you handle the loss (if it happened) both financially and emotionally.
Once you have answered those questions, you need to do some research to find a mutual fund that makes it investments in the types of financial instruments that fits your investment goals and risk tolerance.
Stocks are not necessarily riskier than bonds. For example, a fund that invests in blue chip stocks with solid financial statements and long term performance would be more stable than a fund that invests heavily in C-grade bonds that have a high risk for default. So buying shares in a mutual fund doesn't let you off the hook when it comes to doing some research to make a smart decision.
Once you have decided on the type of securities you want in your fund, you will need to take a look at the fund managers. Think of it as if you were hiring an employee. (In fact, you are. But you don't have to pay the FICA taxes or health insurance!)
In fact, smart investors go one step further. They actually research to find the funds that the fund managers themselves are investing in. When the fund manager has a personal stake in the fund, there's a higher probability that he or she is watching it very carefully. A good example is Warren Buffet and his Berkshire Fund. Both Warren and his Fund have done extremely well over the years.
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So how do you choose one that's right for you? As with choosing stocks, you have to take a look at your personal investment goals and your risk tolerance.
Many people think that buying shares in a mutual funds is automatically less risky than buying shares of individual stocks. But that is not necessarily true. Buying any security poses some amount of risk, which is why there are such lengthy written disclosures given to you before you spend your money.
Analyzing you investment goals involves knowing whether you want long term or short term growth, or ongoing dividend income. And you need to be able to accurately assess your risk tolerance. This is another way of asking how much you could afford to lose and how well could you handle the loss (if it happened) both financially and emotionally.
Once you have answered those questions, you need to do some research to find a mutual fund that makes it investments in the types of financial instruments that fits your investment goals and risk tolerance.
Stocks are not necessarily riskier than bonds. For example, a fund that invests in blue chip stocks with solid financial statements and long term performance would be more stable than a fund that invests heavily in C-grade bonds that have a high risk for default. So buying shares in a mutual fund doesn't let you off the hook when it comes to doing some research to make a smart decision.
Once you have decided on the type of securities you want in your fund, you will need to take a look at the fund managers. Think of it as if you were hiring an employee. (In fact, you are. But you don't have to pay the FICA taxes or health insurance!)
In fact, smart investors go one step further. They actually research to find the funds that the fund managers themselves are investing in. When the fund manager has a personal stake in the fund, there's a higher probability that he or she is watching it very carefully. A good example is Warren Buffet and his Berkshire Fund. Both Warren and his Fund have done extremely well over the years.
With Advertising Funds Freezing Up - Packaging Picks Up.
Cruise along with Pirate Costumes
Forge Welding
I Couldn't Decide on Bridesmaid Gifts!
Diverse Species of Flies
How to make money with google adsense?
New Ivory Ring Bearer Pillows
Exclusive Stiedl design properties sell despite credit crunch
New Teddy Bear Trust to Comfort French Kids in Hospital
How to take care of Dry Skin Acne?
Actonish everyone with Funny Quotes and Sayings
Windows 7 takes over Vista on graphics
New and Cool House Design in Provence
Movie Review: I love you man
Come Home to Warwick’s Natural Abode
Best Tips to Avoid Cancer
The Best Hotel in Las Vegas: The Bellagio
How to stop hair loss?Top hair styling tools - achieve a special look
Friday, March 27, 2009
Understanding the Basic Types of Mutual Funds
For the novice investor, mutual funds seem like a great investment vehicle. They offer managed investing, diversification, and SEC regulation. They are often the first place a financial advisor will send someone new to the stock market. But they come with their own complexities, which often get overlooked. Here we will attempt to demystify the different types of mutual funds and why one might choose that type as their investment medium.
The first and major type of mutual fund is the stock fund, also called an equity fund. These funds invest in shares of stock from various companies they deem to have benefit within the fund portfolio.
Growth Funds
Among the stock funds, the Growth fund is one of the most popular. This type of fund invests in growth stocks; stocks of companies who are developing new products and services, are in good financial order, and are expected to grow faster than other similar companies in the market.
Value Funds
Value funds, on the other hand, invest in companies that the fund managers feel are undervalued by the market. They may have had issues with management or a product, or maybe they are great companies but most investors haven't picked up on them yet. These funds make a profit when their companies improve in either profitability or popularity.
Index Funds
Funds that invest in the same companies as the major indexes are called Index Funds. They generally track along with the index they are targeting. One of the more popular index funds follows the S&P 500 index. An investor would choose this type of fund if they simply want to stay up with market performance, or they cannot decide which other type of fund to invest in.
Sector Funds
Sector funds focus on stocks of companies in a certain industry or market sector. For instance, you might fund sector funds that invest in just biotech, oil and gas, electronics, or banking. Performance of these funds is highly depending on how well that industry is doing. They are more vulnerable to changes in a certain market sector than other funds, but also allow for significant profit from a sector that is doing well.
International Funds
International Funds are just that - funds that invest in international companies. If you have heard there are some great opportunities oversees, maybe in China or India, this might be a fund for you. You purchase shares of these funds with U.S. dollars and the fund takes care of purchasing the various shares of stock in the currency of that country. This is an easy way to get access to emerging markets outside of the United States.
Other types of mutual funds are Bond funds, which consist of bonds from either U.S. Government, Corporate, Municipal or International entities. Total Return Funds combine the two types, investing in both stocks and bonds, to attemp to attain both income and appreciation. Finally, you can also invest in Money Market Funds, which invest in various short-term money market loans. You might choose a Money Market Fund if you want low-risk and are willing to settle for a modest gain.
Friday, March 20, 2009
The Best Index Funds
The best index funds are the ones with the lowest expense ratios. An S&P 500 market weighted index fund will always be same no matter where you choose to invest. Therefore, if you're looking for the best place to invest in index funds chose whatever company minimizes costs the most.
The theory why index funds can outperform active investment strategies is that you're minimizing costs and taxes. Therefore, by investing in index funds with high expense ratios you're defeating the purpose of passive investing.
Finding the best index fund families is pretty easy. Time and time again, 3 mutual fund families have provided the best index funds to their customers.
Vanguard - John Bogle, who created the first index found is the founder of Vanguard. Their strategy is simple, lower costs for investors, to provide the highest possible returns. The Vanguard 500 Index fund is the largest index fund in terms of invested money. Their minimum for opening an index fund, is $3,000.
Fidelity - Fidelity is another company that provides their investors with low cost index fund options. They have one of the largest selections of funds available out of any mutual fund company. Their minimum to invest in an index fund are $10,000.
T. Rowe Price - T. Rowe Price is another company that investor's can find low cost index fund. The advantage to investing in T. Rowe Price is their lower minimums. Currently their minimums are only $1,000 to invest in one of their index funds.
The easiest way to invest in these funds is directly with the fund families. That means signing up at their websites, and avoiding all third parties.
Investing with a third party means higher costs. Investing is a game of very small percentages. You need to maximize your chance for success in areas that you're able to. The only direct control you have over your funds is your expenses. All other variables are unpredictable.
Not only to your investments compound, but expenses to do. Even a $100, or a .1% higher expense ratio on an investment of $100,000 is a lost opportunity to invest. If you were to invest $100 for 30 years at a 10% rate of return, you would end up with $18,094 after 30 years! That same scenario with $500, or a .5% higher expense ratio on an investment of $100,000, costs you $90,471 in 30 years!
The theory why index funds can outperform active investment strategies is that you're minimizing costs and taxes. Therefore, by investing in index funds with high expense ratios you're defeating the purpose of passive investing.
Finding the best index fund families is pretty easy. Time and time again, 3 mutual fund families have provided the best index funds to their customers.
Vanguard - John Bogle, who created the first index found is the founder of Vanguard. Their strategy is simple, lower costs for investors, to provide the highest possible returns. The Vanguard 500 Index fund is the largest index fund in terms of invested money. Their minimum for opening an index fund, is $3,000.
Fidelity - Fidelity is another company that provides their investors with low cost index fund options. They have one of the largest selections of funds available out of any mutual fund company. Their minimum to invest in an index fund are $10,000.
T. Rowe Price - T. Rowe Price is another company that investor's can find low cost index fund. The advantage to investing in T. Rowe Price is their lower minimums. Currently their minimums are only $1,000 to invest in one of their index funds.
The easiest way to invest in these funds is directly with the fund families. That means signing up at their websites, and avoiding all third parties.
Investing with a third party means higher costs. Investing is a game of very small percentages. You need to maximize your chance for success in areas that you're able to. The only direct control you have over your funds is your expenses. All other variables are unpredictable.
Not only to your investments compound, but expenses to do. Even a $100, or a .1% higher expense ratio on an investment of $100,000 is a lost opportunity to invest. If you were to invest $100 for 30 years at a 10% rate of return, you would end up with $18,094 after 30 years! That same scenario with $500, or a .5% higher expense ratio on an investment of $100,000, costs you $90,471 in 30 years!
Monday, March 16, 2009
Choose the Best Performing Mutual Fund Company
Investing in mutual funds is a good way of handling your money. It is one way of saving for the future. There are lots of uncertainties ahead of you and its better to be prepared. Having investments is also the best mode of building wealth. Mutual fund investments can make you richer than what you are at the moment. Your money will be doubled, tripled or even go as high as you can never imagine. Unlike some regular investments like trading in securities, you will not directly handle your investments. A mutual fund is an investment company which do the trading for their investors.
Instead of you trading yourself, you will just have to invest money in funds. What the company will be doing is pool all the money coming from the investments. There is a fund manager who is in-charge in making investments. Actually, the investment will Actually, the investment will depend on the fund manager. If the manager has well-managed the fund, you will surely gain profits. But you don't have to worry about the fund manager. Probably you will doubt whether the fund manager is doing exactly what you are wishing for. Basically, fund managers are experts in the field. The company wouldn't want to jeopardize the investors' money.
They invest in stocks, money market instruments and other financial securities. It is your responsibility to research about the investment company you want to invest in. Make sure to go to a reputable investment company. Usually, there are write-ups on magazines about the best mutual funds around. You can even check on the net. Try to visit different company websites in order to compare their performance. The good thing in the investment is the diversification. You have the option to diversify your investment. You can invest in stocks and other securities. Mutual fund companies however make charges on your investments.
If you want high-risk investment, a higher fee is collected from you. Bear in mind that high risk investments doesn't necessarily mean high returns. For example, in the stock market, prices usually fluctuate on the daily basis. If you invest on a particular share, there is no assurance of an income. You can never tell whether the price will go up or down. You cannot blame the company if you cannot get any profit because stock prices are volatile. In investing you should know the types of mutual funds. There are three types: Class A, Class B and Class C.
Investing in Class A stock is advisable if you want to hold your investment for two years or more. On the other hand, Class B stocks are good if you want to hold the stocks for a longer period of time. While Class C stocks are the best option for short term investment. The value of your shares depends on the performance of your securities. There are lots of mutual fund companies available in the public. A great help in choosing the best performing company is to check rankings. Like for example Lipper Leader Fund RatingsLike for example Lipper Leader Fund Ratings which assesses mutual funds according to five criteria: total return, tax efficiency, expense, preservation and consistent return.
It's really your choice in the end that will matter. Just select the best mutual fund company which can contribute to your financial success.
Instead of you trading yourself, you will just have to invest money in funds. What the company will be doing is pool all the money coming from the investments. There is a fund manager who is in-charge in making investments. Actually, the investment will Actually, the investment will depend on the fund manager. If the manager has well-managed the fund, you will surely gain profits. But you don't have to worry about the fund manager. Probably you will doubt whether the fund manager is doing exactly what you are wishing for. Basically, fund managers are experts in the field. The company wouldn't want to jeopardize the investors' money.
They invest in stocks, money market instruments and other financial securities. It is your responsibility to research about the investment company you want to invest in. Make sure to go to a reputable investment company. Usually, there are write-ups on magazines about the best mutual funds around. You can even check on the net. Try to visit different company websites in order to compare their performance. The good thing in the investment is the diversification. You have the option to diversify your investment. You can invest in stocks and other securities. Mutual fund companies however make charges on your investments.
If you want high-risk investment, a higher fee is collected from you. Bear in mind that high risk investments doesn't necessarily mean high returns. For example, in the stock market, prices usually fluctuate on the daily basis. If you invest on a particular share, there is no assurance of an income. You can never tell whether the price will go up or down. You cannot blame the company if you cannot get any profit because stock prices are volatile. In investing you should know the types of mutual funds. There are three types: Class A, Class B and Class C.
Investing in Class A stock is advisable if you want to hold your investment for two years or more. On the other hand, Class B stocks are good if you want to hold the stocks for a longer period of time. While Class C stocks are the best option for short term investment. The value of your shares depends on the performance of your securities. There are lots of mutual fund companies available in the public. A great help in choosing the best performing company is to check rankings. Like for example Lipper Leader Fund RatingsLike for example Lipper Leader Fund Ratings which assesses mutual funds according to five criteria: total return, tax efficiency, expense, preservation and consistent return.
It's really your choice in the end that will matter. Just select the best mutual fund company which can contribute to your financial success.
Friday, March 13, 2009
Mutual Funds - A Potent But Cautious Tool
Mutual funds have become a potent investment option in the current fluctuating market scenario. Let us discuss why mutual funds have become one of the better bets in investment today.
Mutual funds are managed by expert Fund Managers and hence are in safer hands. An individual novice cannot make a kill in the equity or money market as the said investor may lack the proper expertise to do so. Even in the presence of proper expertise, time is a major factor in managing an individual portfolio. So it's better to leave them in expert funds.
The ideal way to invest in mutual funds in a fluctuating market is SIP or Systematic Investment Plan as it helps an individual to take advantage of the principle of Rupee Cost Averaging. So instead of putting money in lump sum, an SIP is surely a better bet.
There are different types of Mutual Funds available. By nature of lock in period they can be classified to be Open Ended and Close Ended. Open Ended Funds have no lock in period while Close Ended Funds do have.
By asset allocation they can further be classified as Equity, Debt and Gilt Funds. Equity funds invest directly in equities while Debt and Gilt Funds invest in money market instruments and corporate bonds respectively.
Among Equity Funds, there are special sectoral funds like Real Estate, Pharma, Infrastructure etc. But a Diversified Equity Fund is a better bet as it allocates funds to all sectors and doesn't comprehensively bank on a particular sector.
One can invest in the appreciation option of a fund where the NAV gets increased or the dividend payout or dividend reinvestment option. In the former, dividend is given directly to the investor while in the later the same accrued dividend is used to purchase additional units of the said fund on behalf of the investor.
Fund houses do charge an entry or exit load for investing in mutual funds but if the same investment is done directly through the fund house instead through a broker, the said fees are generally waived. The load is charged to pay for the brokerage of the dealers and distributors in general. Fund houses also offer options of switching over to different options of a same fund or moving over to an entirely different fund of the same fund house.
Thus in general Mutual Funds are a great way of investment as it allows you to buy quality equity or money market instruments with even very small amounts of money. It is in general a careful, planned and judicious approach of investing for a long to medium term to fulfill the financial goals of life.
Mutual funds are managed by expert Fund Managers and hence are in safer hands. An individual novice cannot make a kill in the equity or money market as the said investor may lack the proper expertise to do so. Even in the presence of proper expertise, time is a major factor in managing an individual portfolio. So it's better to leave them in expert funds.
The ideal way to invest in mutual funds in a fluctuating market is SIP or Systematic Investment Plan as it helps an individual to take advantage of the principle of Rupee Cost Averaging. So instead of putting money in lump sum, an SIP is surely a better bet.
There are different types of Mutual Funds available. By nature of lock in period they can be classified to be Open Ended and Close Ended. Open Ended Funds have no lock in period while Close Ended Funds do have.
By asset allocation they can further be classified as Equity, Debt and Gilt Funds. Equity funds invest directly in equities while Debt and Gilt Funds invest in money market instruments and corporate bonds respectively.
Among Equity Funds, there are special sectoral funds like Real Estate, Pharma, Infrastructure etc. But a Diversified Equity Fund is a better bet as it allocates funds to all sectors and doesn't comprehensively bank on a particular sector.
One can invest in the appreciation option of a fund where the NAV gets increased or the dividend payout or dividend reinvestment option. In the former, dividend is given directly to the investor while in the later the same accrued dividend is used to purchase additional units of the said fund on behalf of the investor.
Fund houses do charge an entry or exit load for investing in mutual funds but if the same investment is done directly through the fund house instead through a broker, the said fees are generally waived. The load is charged to pay for the brokerage of the dealers and distributors in general. Fund houses also offer options of switching over to different options of a same fund or moving over to an entirely different fund of the same fund house.
Thus in general Mutual Funds are a great way of investment as it allows you to buy quality equity or money market instruments with even very small amounts of money. It is in general a careful, planned and judicious approach of investing for a long to medium term to fulfill the financial goals of life.
Thursday, March 12, 2009
Mutual Funds Investment Can Give You Big Returns
People are more careful with their money these days. They are more interested in storing money for the rainy days. They prefer to have it in liquid form so they can pull out their money when they want to and most especially when they need to. Although there are still some people who prefer to invest their money because the return of investment is quite large if compared to the interest given by banks.
The easiest form of investment is Mutual Funds Investment. It is best to make use of a mutual fund calculator so computation of interest will be easier on you. Investors who are into Mutual Funds make use of them. It is widely available online. Although there would still be a certain amount of risk. To minimize the risk involved, study past performance of the fund that you are interested in because chances are, past performance will be able to predict or at the very least give you an idea on how it will turn out. The saying, "past behavior predicts future performance", is applicable in this scenario. Always learn the risks involved. If it is somehow makes you uncomfortable, stop and think about investing. We should be careful in handling money, especially in this day and age. We do not want to end up with a lot of regrets and a lot of debts.
For the first time investors, it will take a lot of hard work and studying to know the ins and outs of investing. But it will get easier every time. Don't worry because sooner or later, you will get the hang of it. Who knows, you might be the one who will be giving us tips on proper investing in the future.
The easiest form of investment is Mutual Funds Investment. It is best to make use of a mutual fund calculator so computation of interest will be easier on you. Investors who are into Mutual Funds make use of them. It is widely available online. Although there would still be a certain amount of risk. To minimize the risk involved, study past performance of the fund that you are interested in because chances are, past performance will be able to predict or at the very least give you an idea on how it will turn out. The saying, "past behavior predicts future performance", is applicable in this scenario. Always learn the risks involved. If it is somehow makes you uncomfortable, stop and think about investing. We should be careful in handling money, especially in this day and age. We do not want to end up with a lot of regrets and a lot of debts.
For the first time investors, it will take a lot of hard work and studying to know the ins and outs of investing. But it will get easier every time. Don't worry because sooner or later, you will get the hang of it. Who knows, you might be the one who will be giving us tips on proper investing in the future.
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