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Your Questions About Mutual Funds For Dummies




Joseph asks…




Books on Mutual Funds?
I bought the mutual funds for dummies book. I am a beginner so does anybody else have any
other recommendations?




Steve Winston answers:

Books by William E. Donoqhue,No-Load Mutual Fund Guide.....They're Dated but still well worth
reading..He Created the web site moneyletter.com,..but he sold it...They still follow his
Strategies.It's a monthly letter that follows the top rated No-load and Lo-load Mutual Funds.




                                                                                       1/8
Mark asks…




I have mutual funds and not sure what I'm doing.?
We had a financial advisor who signed us up for mutual funds. We pay $140 a month. We
have been paying this for the last 3 years. It says on our statements that it has a face value of
$27,000. What does that mean? My financial advisor explained this in a very complicated way
and I didn't understand how mutual funds work. Can some put them in "Mutual funds for
Dummies" terms?




Steve Winston answers:

A mutual fund is basically a basket of stocks (or bonds). In a mutual fund, many investors pool
their money together with a predetermined investment objective. The mutual fund will have a
fund manager who is responsible for investing the pooled money into stocks or bonds (and for
selecting which stocks or bonds to buy and/or sell). Mutual funds can have different objectives.
For example some purchase only large capitalization stocks (that is, very large companies, such
as Microsoft, GM, Johnson & Johnson, etc.); others purchase only small capitalization stocks
(that is, smaller companies, such as Akamai, American Eagle Outfitters, etc.); others purchase
only stocks of foreign companies. There are literally hundreds, if not thousands, of mutual
funds, and some are quite specialized (for example, some funds invest only in Japanese
stocks).

Probably the biggest advantage to mutual funds is diversification. Mutual funds usually hold
dozens, if not hundreds or thousands of different stocks. Diversification means that you're
spreading out your money across many different types of stocks. When one investment (for




                                                                                             2/8
example, stock in Procter & Gamble) is down another (for example, Walmart) might be up.
Choosing to diversify your investment holdings reduces your risk tremendously because your
money is not all tied to the fate of one or even ten companies, but to dozens and dozens.

It's unclear from your question whether you're investing $140/month in mutual funds, or whether
you're paying your advisor $140/month to oversee your investments. If the $140 is going to your
advisor, that seems like an awful lot.

What is your financial objective in investing in mutual funds? If it's retirement, you might want to
think about dumping your advisor and investing in a target retirement fund. A target retirement
fund is aimed at an approximate retirement date (such as 2045), and the mutual fund company
automatically adjusts the composition of the fund according to the projected retirement date. For
example, with a target date retirement fund geared toward persons retiring in 2045, the the
holdings in the fund will become more conservative (less risky) as the target date approaches.
The theory is that the closer you get to retirement, the less risk you want to take with the money
that you will need to live on after you retire.

One good source that you may wish to consult is vanguard.com. Vanguard is the second or
third largest mutual fund company in the country, and it offers a number of target date
retirement funds (for example, Target Retirement Fund 2005, 2010, 2015, 2020 . . . Up to
2050). Any mutual fund has expenses that it charges the investor (usually called the expense
ratio or annual expense ratio), and Vanguard's are among the lowest in the industry. (For
example, the expense ratio for the Target Retirement 2045 fund is 0.21%; many mutual funds
have expense ratios above 1%.)

Anyway, I suggest you go to the Vanguard website,
https://flagship.vanguard.com/VGApp/hnw/HomepageOverview. Click on "Plain Talk Investor
Education," then on "General Investment Planning," and then on "Create Your Investment
Plan." It'll walk you through a questionaire and give you guidance on what sorts of investments
you should be thinking about. (There's no obligation or fee involved with doing this.)

As for the $27,000 on your statements, I think that means your investments have a current
value of $27,000. It should be fairly easy to transfer that money to other mutual funds (if you so
choose), but you should be aware that there may be tax consequences (capital gains) to doing
so. However, if your current mutual funds are not performing well and/or have high expense
ratios, it may be in your best interest to get rid of them and invest in something else.

P.S. I don't work for Vanguard, although I do have money invested with them. I just think they
have a very efficient and low-cost operation, and that their funds generally have a good
performance record.




                                                                                              3/8
William asks…




What books are easy to read and will give me decent investment
advice?
Im reading Mutual Funds For Dummies




Steve Winston answers:

That is a good start (that is how I started), in fact a lot of the investing "for Dummies" books are
good.

The Wall Street Journal Complete Retirement Guidebook is good.

Rich Dad, Poor Dad is a good "philosophical" read though it is not very practical.

Peter Lynch is a good author and I have even read one of "gasp" James Cramer's books.

Security Analysis by Benjamin Graham is a thick read but good if you understand the content
even though the book is quite old.

You seem to be on the right path. After reading a book just starting searching online for other
books dealing with some type of investing/financial concepts. Also try to read AT LEAST one
new book on investing per year.

My $0.02




                                                                                               4/8
Daniel asks…




I have $2,000 - Do I get a Mutual Fund, ETF, or Index Funds?
Or stock market...? I'm still in college and i'm not sure where is a good place to start investing?
I'm going to get investing for dummies this weekend - and I've been trying to read around but I
haven't gotten a clear answer.

Thanks!!




Steve Winston answers:

OK, you're really getting the run-around here with some of these answers. The answer to your
question depends on your financial situation. If you're in college, I'm going to assume you have
no earned income right now (thereby making you ineligible to contribute to an IRA). I'll also
assume this is all the savings you have. So here's my advice based on those assumptions:

1. Keep some of it (if not all of it) in cash. You need to have cash for short term goals and
emergencies so that you don't have to rack up credit card debt to pay for that stuff when it




                                                                                                5/8
comes up. If you're wanting to go on spring break or vacation, buy a car, or buy furniture for an
apartment within a year or so, then you should keep this money in cash to cover those
expenses.

2-A. However, if your parents are willing and able to pay for that stuff, or if you have other
savings for that, then you don't necessarily need to have this money in cash (though you may
still want to in case you want/need to buy stuff that they won't pay for or without their
knowledge). In that situation I would recommend putting the money in a low cost US stock
market index fund. (Remember, you should only invest in stocks if you won't need this money
for several years--otherwise keep it in cash). It can grow untouched for years and you'll have a
nice little nest egg when you want to get your own place, pay for a wedding, or whatever down
the road.

2-B. If you DO have any earned income (for 2006 or 2007), then I would open a Roth IRA and
put that index fund in there. There are many advantages to this; you'll read about them in any
financial planning book you choose.

Mutual funds, index funds, and ETFs all are different ways to own stocks; in fact you can buy
the exact same stocks through each different vehicle. Index funds are a type of mutual fund; the
difference is that they passively mimic the market rather than having active managers who pick
stocks and try to outperform the market. Because of this they are much cheaper to own and
invest in than mutual funds. ETFs are funds that mimic the market, like index funds, but they are
traded like stocks through a brokerage account. You'll be best off with a plain old index fund;
most people are. I highly recommend Vanguard or Fidelity; they have the best reputations,
lowest fees, and many top rated funds to choose from (index and mutual).




Mandy asks…




Can I buy into more than one mutual fund?



                                                                                            6/8
I am an investing dummy..Just know I need to save for retirement....I have a Scottrade account
with a ROTH, and currently only have added funds to the IRA to fund CAIBX. Can I add
additional funds to my account and buy into other mutual funds in this same IRA? If so, any
one that anyone would suggest for a moderate risk?
I am very good in my profession, but please explain as if you were explaining to a 12 year old,
as I am lost in your explanations




Steve Winston answers:

Yes you can buy more than 1 mutual fund and since your primary concern is investing you can
attain good asset allocations by investing in more than one mutual fund.

Yes you can expand your IRA o ROTH IRA with additional funds.

Without having more information about your personal information, such as age, current income
and other data such as risk tolerance, martial status, and demographics it would be very
inappropriate for me or any other responsible person to provide specific investment information
in this type of media.

Also it would not be appropriate for any professional to provide any specific investing advice
based on the information provided. And it would not be prudent for you to accept any
investment advice from unknown individuals here at YA or a similar media.

There are many people just like you that are, or were looking to invest and those that did bought
Mutual Funds and/or Exchange Traded Funds (ETFs). One purpose of mutual funds is to help
investors like you, who are either just entering the investment world or who have no investing
experience. Once you feel you at least have an understanding of investments you should look
into ETFs which are similar to mutual funds but are traded on the exchanges.

Mutual Fund companies as well as ETFs have an entire array of products many will fit your
needs. Read about the various products and in doing so you will be getting investment ideas
and at the same time educating yourself about investing.

You could also contact the funds companies for more information. I have found that Vanguard
(http://www.vanguard.com/) & Fidelity Investments (https://www.fidelity.com/)




                                                                                            7/8
can meet your needs for mutual funds. The service and information they provide is all free and
                                   you will find it helpful. Or you can call Scottrade and speak to one of their Reps that specialize
                                   in fund products, once again this service is free.

                                   Good luck on your journey




                                   Powered by Yahoo! Answers




                                   Read More… Your Questions About Mutual Funds For Dummies




                                                                                                                                 8/8
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Your Questions About Mutual Funds For Dummies

  • 1. Your Questions About Mutual Funds For Dummies Joseph asks… Books on Mutual Funds? I bought the mutual funds for dummies book. I am a beginner so does anybody else have any other recommendations? Steve Winston answers: Books by William E. Donoqhue,No-Load Mutual Fund Guide.....They're Dated but still well worth reading..He Created the web site moneyletter.com,..but he sold it...They still follow his Strategies.It's a monthly letter that follows the top rated No-load and Lo-load Mutual Funds. 1/8
  • 2. Mark asks… I have mutual funds and not sure what I'm doing.? We had a financial advisor who signed us up for mutual funds. We pay $140 a month. We have been paying this for the last 3 years. It says on our statements that it has a face value of $27,000. What does that mean? My financial advisor explained this in a very complicated way and I didn't understand how mutual funds work. Can some put them in "Mutual funds for Dummies" terms? Steve Winston answers: A mutual fund is basically a basket of stocks (or bonds). In a mutual fund, many investors pool their money together with a predetermined investment objective. The mutual fund will have a fund manager who is responsible for investing the pooled money into stocks or bonds (and for selecting which stocks or bonds to buy and/or sell). Mutual funds can have different objectives. For example some purchase only large capitalization stocks (that is, very large companies, such as Microsoft, GM, Johnson & Johnson, etc.); others purchase only small capitalization stocks (that is, smaller companies, such as Akamai, American Eagle Outfitters, etc.); others purchase only stocks of foreign companies. There are literally hundreds, if not thousands, of mutual funds, and some are quite specialized (for example, some funds invest only in Japanese stocks). Probably the biggest advantage to mutual funds is diversification. Mutual funds usually hold dozens, if not hundreds or thousands of different stocks. Diversification means that you're spreading out your money across many different types of stocks. When one investment (for 2/8
  • 3. example, stock in Procter & Gamble) is down another (for example, Walmart) might be up. Choosing to diversify your investment holdings reduces your risk tremendously because your money is not all tied to the fate of one or even ten companies, but to dozens and dozens. It's unclear from your question whether you're investing $140/month in mutual funds, or whether you're paying your advisor $140/month to oversee your investments. If the $140 is going to your advisor, that seems like an awful lot. What is your financial objective in investing in mutual funds? If it's retirement, you might want to think about dumping your advisor and investing in a target retirement fund. A target retirement fund is aimed at an approximate retirement date (such as 2045), and the mutual fund company automatically adjusts the composition of the fund according to the projected retirement date. For example, with a target date retirement fund geared toward persons retiring in 2045, the the holdings in the fund will become more conservative (less risky) as the target date approaches. The theory is that the closer you get to retirement, the less risk you want to take with the money that you will need to live on after you retire. One good source that you may wish to consult is vanguard.com. Vanguard is the second or third largest mutual fund company in the country, and it offers a number of target date retirement funds (for example, Target Retirement Fund 2005, 2010, 2015, 2020 . . . Up to 2050). Any mutual fund has expenses that it charges the investor (usually called the expense ratio or annual expense ratio), and Vanguard's are among the lowest in the industry. (For example, the expense ratio for the Target Retirement 2045 fund is 0.21%; many mutual funds have expense ratios above 1%.) Anyway, I suggest you go to the Vanguard website, https://flagship.vanguard.com/VGApp/hnw/HomepageOverview. Click on "Plain Talk Investor Education," then on "General Investment Planning," and then on "Create Your Investment Plan." It'll walk you through a questionaire and give you guidance on what sorts of investments you should be thinking about. (There's no obligation or fee involved with doing this.) As for the $27,000 on your statements, I think that means your investments have a current value of $27,000. It should be fairly easy to transfer that money to other mutual funds (if you so choose), but you should be aware that there may be tax consequences (capital gains) to doing so. However, if your current mutual funds are not performing well and/or have high expense ratios, it may be in your best interest to get rid of them and invest in something else. P.S. I don't work for Vanguard, although I do have money invested with them. I just think they have a very efficient and low-cost operation, and that their funds generally have a good performance record. 3/8
  • 4. William asks… What books are easy to read and will give me decent investment advice? Im reading Mutual Funds For Dummies Steve Winston answers: That is a good start (that is how I started), in fact a lot of the investing "for Dummies" books are good. The Wall Street Journal Complete Retirement Guidebook is good. Rich Dad, Poor Dad is a good "philosophical" read though it is not very practical. Peter Lynch is a good author and I have even read one of "gasp" James Cramer's books. Security Analysis by Benjamin Graham is a thick read but good if you understand the content even though the book is quite old. You seem to be on the right path. After reading a book just starting searching online for other books dealing with some type of investing/financial concepts. Also try to read AT LEAST one new book on investing per year. My $0.02 4/8
  • 5. Daniel asks… I have $2,000 - Do I get a Mutual Fund, ETF, or Index Funds? Or stock market...? I'm still in college and i'm not sure where is a good place to start investing? I'm going to get investing for dummies this weekend - and I've been trying to read around but I haven't gotten a clear answer. Thanks!! Steve Winston answers: OK, you're really getting the run-around here with some of these answers. The answer to your question depends on your financial situation. If you're in college, I'm going to assume you have no earned income right now (thereby making you ineligible to contribute to an IRA). I'll also assume this is all the savings you have. So here's my advice based on those assumptions: 1. Keep some of it (if not all of it) in cash. You need to have cash for short term goals and emergencies so that you don't have to rack up credit card debt to pay for that stuff when it 5/8
  • 6. comes up. If you're wanting to go on spring break or vacation, buy a car, or buy furniture for an apartment within a year or so, then you should keep this money in cash to cover those expenses. 2-A. However, if your parents are willing and able to pay for that stuff, or if you have other savings for that, then you don't necessarily need to have this money in cash (though you may still want to in case you want/need to buy stuff that they won't pay for or without their knowledge). In that situation I would recommend putting the money in a low cost US stock market index fund. (Remember, you should only invest in stocks if you won't need this money for several years--otherwise keep it in cash). It can grow untouched for years and you'll have a nice little nest egg when you want to get your own place, pay for a wedding, or whatever down the road. 2-B. If you DO have any earned income (for 2006 or 2007), then I would open a Roth IRA and put that index fund in there. There are many advantages to this; you'll read about them in any financial planning book you choose. Mutual funds, index funds, and ETFs all are different ways to own stocks; in fact you can buy the exact same stocks through each different vehicle. Index funds are a type of mutual fund; the difference is that they passively mimic the market rather than having active managers who pick stocks and try to outperform the market. Because of this they are much cheaper to own and invest in than mutual funds. ETFs are funds that mimic the market, like index funds, but they are traded like stocks through a brokerage account. You'll be best off with a plain old index fund; most people are. I highly recommend Vanguard or Fidelity; they have the best reputations, lowest fees, and many top rated funds to choose from (index and mutual). Mandy asks… Can I buy into more than one mutual fund? 6/8
  • 7. I am an investing dummy..Just know I need to save for retirement....I have a Scottrade account with a ROTH, and currently only have added funds to the IRA to fund CAIBX. Can I add additional funds to my account and buy into other mutual funds in this same IRA? If so, any one that anyone would suggest for a moderate risk? I am very good in my profession, but please explain as if you were explaining to a 12 year old, as I am lost in your explanations Steve Winston answers: Yes you can buy more than 1 mutual fund and since your primary concern is investing you can attain good asset allocations by investing in more than one mutual fund. Yes you can expand your IRA o ROTH IRA with additional funds. Without having more information about your personal information, such as age, current income and other data such as risk tolerance, martial status, and demographics it would be very inappropriate for me or any other responsible person to provide specific investment information in this type of media. Also it would not be appropriate for any professional to provide any specific investing advice based on the information provided. And it would not be prudent for you to accept any investment advice from unknown individuals here at YA or a similar media. There are many people just like you that are, or were looking to invest and those that did bought Mutual Funds and/or Exchange Traded Funds (ETFs). One purpose of mutual funds is to help investors like you, who are either just entering the investment world or who have no investing experience. Once you feel you at least have an understanding of investments you should look into ETFs which are similar to mutual funds but are traded on the exchanges. Mutual Fund companies as well as ETFs have an entire array of products many will fit your needs. Read about the various products and in doing so you will be getting investment ideas and at the same time educating yourself about investing. You could also contact the funds companies for more information. I have found that Vanguard (http://www.vanguard.com/) & Fidelity Investments (https://www.fidelity.com/) 7/8
  • 8. can meet your needs for mutual funds. The service and information they provide is all free and you will find it helpful. Or you can call Scottrade and speak to one of their Reps that specialize in fund products, once again this service is free. Good luck on your journey Powered by Yahoo! Answers Read More… Your Questions About Mutual Funds For Dummies 8/8 Powered by TCPDF (www.tcpdf.org)