Here are three facts that are the bare bone necessities to know before you start to invest in mutual funds. In this series, I will give you information little by little about mutual funds until I feel you have a great grasp on the topic, and can choose your own high quality funds.
1. WHAT IS A MUTUAL FUND?
A mutual fund combines money from several investors to invest in different types of investments or investment companies. The investments could be stocks, bonds, money market instruments’ or other types of investments.
Each investor in the mutual fund hold a proportion of the investment in the way of shares. There are low-risk, mid-risk and high risk mutual fund companies, as well as low earning and high earning companies.
One mutual fund company is typically very diversified and can invest in as many as 400 companies or as few as 40 companies. Diversity is what takes much of the risk out of mutual funds.
2. HOW DO I PURCHASE A MUTUAL FUND?
Stocks are purchased from stock exchanges, such as the New York Stock Exchange, usually through a brokerage office or online broker. Mutual funds are baskets of stocks and can be purchased from a variety of places.
Mutual fund shares are purchased from the mutual fund company itself or from a broker. When you are educated in mutual funds, which I intend to do, you can easily purchase your own mutual funds online at any number of investment companies.
Registered and licensed Investment Advisers, in a team or individually, manage investment portfolios of mutual funds.
Investors have an advantage, by using the expertise and experience of the advisers.
Lois Center-Shabazz | Course Delta Agency
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Don’t Let Negative Thinking Place You in Investment Stops, Start Investing Now
Here are 3 investment stops to start investing money for retirement, savings, vacation or just a rainy day. It is essential if you want to ever retire, you must know how to invest.
The 3 Major Investment Stops
I don’t have enough money to invest.
I have to pay off my bills first.
I have money to invest, but I am afraid.
What is stopping you from starting to invest? Three of the most common investment stops are listed above. What can you do to start yourself to invest?
There are many inexpensive ways to start investing. You can open an investment account with a broker that sells shares or partial shares of stocks.
You can open a mutual fund account with a mutual fund company that will allow you to start with a small amount of money. And finally, you will have to shed some old baggage about investing, for example, “I will start investing when I get my bills paid off,” or “I am afraid to invest.”
Start With the Right Investment Priorities:
You don’t have to have a lot of money to start an investment account.
There are mutual fund companies that will allow you to start an investment account for as little as one hundred dollars. You can add as little as twenty-five dollars a month.
The monthly additions work to significantly increase your account due to dollar cost averaging. Low-cost, low-risk mutual funds have a tendency to be less complicated than stocks. But, low-risk dividend paying stocks of stable companies are a good research vehicle as well as mutual funds.
There are companies that will allow you to invest in a few shares or partial shares of stock starting with as little as eight dollars a month. Then, adding eight dollars a month to your account to purchase these shares or partial shares of stocks .
I have to pay off my bills before I start to invest.
It is a good idea to have your debt well under control before you start to invest. The interest rates on outstanding debts sometimes are in excess of the interest rates on investments. Coupled with compounded interest, high debt payments can be excessive.
There is an easy way to invest after you have your bills under control, that is to treat your investment as “just another bill.” Before you know it, you will have a significant investment account.
Do you have plenty of money to invest, but you are simply afraid? I think the term for that is, “fear of the unknown.” That is probably the easiest investment stop we address in this article.
Study the investment tutorials in my eBook and course; Step by Step Car Buying Tips for Women, that can save your financial life. You can download it instantly, and the eBook is practically free, the price is so low.
Then, you can go on to understand high level home buying tips, so you buy the best house for the best prices. Now move on to my free discovery session and enjoy the preponderance of money information there.
Lois Center-Shabazz | Money Strategist | Personal Finance Coach
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5 Retirement Tips That Make Retirement Planning a Serious Issue
Retirement tips are for those who never think that retirement day will come, or don’t know the potential difficulties they face when they retire. It always seems so far away, but those who have retired tell me it came faster than they ever imagined.
Here are some actual examples of problems seniors tell me they’ve had because they didn’t take their retirement date seriously in their 20’s, 30’s or 40’s. Here are 5 retirement tips to include in your retirement planning.
Retirement tips #1 – Medicare + 20%
Medicare pays 80% of most of the senior medical cost. Because of this, senior citizens are required to take out a Medicare Supplement policy. The supplement pays the extra 20%. Some seniors planned so poorly that they can’t afford or pay for the Medicare supplement. Because they have no supplement insurance, they are required to pay the 20% each time they go to the doctor, have surgery, chemotherapy or any other medical treatment. If they have a home, the home will be attached to pay for their medical balances, usually if they sell it or pass away. If they don’t have an insurance supplement or pay the 20%, some medical facilities will not treat them. There are two types of medicare: Regular Medicare (government sponsored) and Medicare Advantage (private coverage). Regular medicare typically pre-authorizes and pays promptly. Medicare advantage includes
many “extras” to “induce” seniors to sign up, but does not authorize major
treatment in many cases, and does not follow through with the extras. Doctors I talk to recommend seniors sign up for regular medicare.
Retirement tips #2 – Social Security as a Supplement
Many employees, both young and old, can pay into a 401k plan but opt-out of it, because either they, 1. Don’t understand what it is, 2. Don’t get matched by their employer, or 3. Feel they have plenty of time to worry about it later. The fact is there are numerous articles to explain 401k plans, the match is a nice side benefit—but you still get a tax benefit when you contribute without a match. The amount of a monthly social security retirement check is small compared to your working retirement income. Because of this, social security is meant to be a supplement to your retirement, so think hard about creating your main retirement now. The earlier you start, the easier it is, and the less you need to put into your account, monthly.
Retirement tips #3 – 401k Protection
A popular retirement supplemental plan is the 401k, but you must protect it. Once you start to fund a 401k protect it with all your might. The protections include; 1. Leaving it alone for retirement – this means no borrowing. This is a provision that should not be allowed in a 401k plan since it is meant for retirement. Everything should be done to avoid borrowing from your 401k, including careful planning early in your career. Here are some protection ideas. Make yourself several “would if” scenarios and fulfill those scenarios early.
The examples are — “what if I lose my job”, “what if I need a large home repair”, “what if I want to go on a nice vacation”, “what if I have difficulty paying my mortgage”. All those issues can be addressed by 1. Creating savings accounts, 2. Cutting your living expenses now, 3. Make all major purchases affordable. You can come up with more solutions. The point is to come up with solutions to problems that don’t exist yet, so you never need to borrow against your 401k plan later.
Another protection is to keep your 401k balance to yourself. Scam artist prey on older people and sometimes younger people who have large 401k balances, because they know you can take that money out of your account anytime. A large lump sum withdrawal will trigger a large tax bill if you take it out at once. But, that is no concern of any sales person (many of whom are fake), when it comes to your 401k. You should be the only one who knows the balance. It’s not a good idea to share your balance with strangers.
The popular show, American Greed profiled the case of two ladies, not very old, but managed to retire with large 401k type accounts. One had $600,000 and one had $1 million. Both told friends, who told a fake investment person, who contacted them, talked them into investing with him, and he stole all their money. Their primary problem was that they should never have met with or believed in a stranger who claimed to be investing in the music production business with high returns.
The only thing they got was a huge bill from the IRS since they took the money out within a short period. The man went to prison, but they did not get their money back. Friends, family, and strangers have no right to the information in your 401k or 403b plan. Some elderly people have had their 401k stolen from them by their own relatives, including greedy children.
Retirement tips #4 – 403b Protections
The 403b is like the 401k, usually for non-profits. Fund the accounts, make sure you understand where to keep the money when you retire, you will have a few options. But, mostly understand that your balance is your personal business, and you must pay taxes on the amount you take out. The purpose of your 401k or 403b is to supplement a pension or other retirement plan.
Retirement tip #5 – Tax Shelter Annuity Movement
Many school districts offer tax shelter annuities as supplemental retirement accounts. After retirement, they are offered the right to roll over into an annuity outside their job. Be careful, make sure the costs aren’t prohibitive. Also, you can only take out a little at a time, otherwise taxes would be too high. Again, your tax shelter annuity balance is your business, no one else’s. Look at online investment banks such as fidelity.com, troweprice.com, schwab.com or others – call and discuss low cost annuities to roll over your annuity. You can also discuss other low risk options. Take your time and don’t allow anyone to pressure you.
This is only the beginning, but if you take these retirement tips serious, and include them in your retirement planning, you will be on the road to retirement bliss. Understand the limits of social security when you plan your retirement.
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You may be able to sell your home tax-free. This is a tax saving Americans rarely discuss when they are complaining about tax rates. The tax-free benefit that comes with the sale of a home is one of the major benefits of home ownership. The interest deduction is another benefit that occurs while occupying the home.
Most earned income is taxable, but the income you earn from the sale of your home may not be. Therefore, you will not have to pay taxes on the equity from the sale of your home if you meet certain IRS requirements.
In most states, if you sell your home with a real estate broker you will have to pay fees to the real estate company for the sale as well as other costs.
Other cost includes sellers escrow cost and repairs to the home as required by law or requested by the buyers.
Many of your cost are tax deductible, which means you will get some of the money back when you file your taxes.
To get homeowners tax breaks when you sell your home pay attention to the requirements for a tax-free home sale
If you qualify, you can exclude part or all of the gain from the sale of your home. To get the exclusion, the tax law requires that you use the home as your main home, and own it for 2 out of 5 years prior to the date of sale.
There are exceptions to this rule if you are military, handicapped, or have been in the peace corps. Read IRS publication 523 for the specific rules.
There is a limit to the financial exclusions when you buy a home. You can only get up to $250,000 tax-free if you are single and a $500,000 tax-free gain if you are married. In most cases, you can exclude the gain on the sale of your home every two years. If you
sell your home at a loss, it is not tax deductible.
If your home sale is not taxable you may not need to report the sale to the IRS, if all or part of the sale is taxable you will need to report the sale.
Some of you may have used the first time home buyers credit to buy your home, if so, this is an exception and certain rules will apply to your sale.
These rules are current as of August 2016, verify if there are new rules in place when you sell your home after this date, by going to IRS.gov.
There are many advantages to selling your home tax-free up to the exclusions.
1. You get to keep some or all of your profits from equity up to the $250,000 for singles or $500,000 for married couples.
2. You can have a large down payment for your next home or use it for retirement income.
3. When you sell, you can use part of the money to pay off bills, fund an education or start a savings account.
4. You don’t have to purchase your next home immediately; you have time to evaluate all of your options for a new home.
5. If you live in your previous rental home 2 of the 5 prior years, you can sell your home tax-free now that it is not be considered a rental home.
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Protect Yourself From Investment Fraud For Now and in The Future!
Some of you are active investors, want to be active investors in various investment vehicles and some of you will be indirectly affected by stocks, bonds, mutual funds or other investments. Those investments could come to you via your 401k plan, an inheritance or other means. My point is anyone could be exposed to the financial markets intentionally or unintentionally. Because of this, you need to know how to protect yourself form investment fraud.
The Enron company (stock symbol – ene) “stock” scandal has been widely reported in the news in October 2001. The company stock went from $83 to .25 cents in just one year. According to the widely televised news reports one possible reason was accounting improprieties.
The most widely speculated impropriety was over-reporting of earnings by some officers. While downright false accounting reports by major companies are rare, and difficult to detect, you need to protect yourself from these types of scandals. We ask the following questions and attempt to answer them here. How do these scandals occur? Who is most vulnerable to stock scandals? How can investors protect themselves from this and other types of stock scandals?
Although most investment firms and products are ethical and legal, investment schemes and frauds do exist within the securities industry. Con artists are quick to pick up on the newest hot investment prospects and the latest technology trends and use them as a basis for fraudulent investment schemes. Bernie Madoff of Madoff Investments is probably one of the most famous investment fraud schemes.
Many of those schemes are very enticing and very difficult to spot. Almost all of them depend on trusting investors willing to believe the con artist’s claim without question. It may be difficult to identify fraudulent schemes, but there are some red flags you can pay attention to and avoid becoming a victim. Here are some pointers.
- Deal only with firms and individuals you have researched and trust.
- Be skeptical of any investment opportunity that comes about as a result of an unsolicited telephone call, Internet offering or even a television advertisement if the product cannot be easily researched. Never invest without doing some research about the opportunity. The Federal Communications Commission regulates telephone solicitations and automated calls under the Telephone Consumer Protection Act. Provisions of that act require a person making calls to identify themselves and the name of the entity on whose behalf the call is being made.
They must also give you the telephone number where the person or entity may be contacted. Other provisions require the entity to place your name on its no call list upon a written request and prohibit unsolicited calls between 9:00 p.m. and 8:00 a.m. Obtain additional information by contacting the Federal Communications commission, www.fcc.gov or 1919 M Street NW, Washington, DC 20554,
phone- 1 (888) 225-5322. Verify that your broker is certified and/or licensed through the CFP board or Finra. The Certified Financial
planner is not necessary, just good, but being registered or licensed is the law.
- Beware of glowing promises of high returns. Ask yourself why the promoter is so eager to share this opportunity with you, and remember that if it sounds too good to be true, it probably is.
- Don’t invest in a product you don’t understand, do your reserch, do lots of reading. There are many online investment portals where you can learn basic investing.
- Carefully analyze promotions offering high returns by investing in the latest technology developments. The promise of high returns is a red flag for investment fraud.
- Resist the temptation to invest “right now” because “tomorrow will be too late.” Don’t be surprised if they follow that line by “We will have someone there within the hour to deliver the prospectus and pick up your check.” Another line is, “I will have my supervisor call you and explain everything”.
- Never believe a salesperson when he says, “You don’t have to read the prospectus or contract. That’s just for the lawyers.”
- Do not give out your social security number, credit card or bank account information to people who solicit you.
- Look for audited financial statements and review them carefully. Be leery of the absence of audited financial statements and scrutinize unaudited financial statements carefully because an expert third party has not attested to their accuracy. Question any financial statement projections to see if the expenses and profits appear reasonable.
- Take notes of your conversations with your broker-dealer agent or investment advisor representative. Include the dates and times.
- Always..always..always….read and understand the legally required offering documents; ask questions and insist on reasonable answers. Seek advice from a knowledgeable friend or consult with your financial advisor, and invest only after you have satisfied yourself that the risk in this particular investment agrees with your financial objectives. You can read the recent news on a stock, research here for stocks, and here for mutual funds, Fidelity Investments is a major firm that has a large, easy to use research section.
- Save all records of transactions and correspondence. Never part with original documents.
- When considering equity securities prices below five dollars per share or unit and a market value of $250 million, these are penny stocks or microcap stocks. The risk of buying these stocks are extremely high. Be sure you receive, read and understand the lawfully required consumer protection information prior to conducting any business, read here to understand why microcap or penny stocks are, in many cases fradulent stocks.
- Slick promoters know how to make investment fraud sound legitimate and inspire your confidence. That is why they succeed so often. If you feel you have been victimized, report the matter to your state corporation commission, division of securities and retail franchising. On the national level you can contact the Securities and Exchange Commission (SEC), or the National Association of Securities Dealers, inc. (NASD), via the websites. You might also want to contact an attorney to determine your rights or file an arbitration claim. Your prompt complaint may keep others from being defrauded and increase your chance of getting your money back.