Mutual Fund Glossary
SEP IRA Plan
If you are a small business owner or self-employed you can still make contributions for your retirement years. This can be done by using a Simplified Employee Pension Plan (also known as SEP IRA). Separate SEP IRA accounts are opened for each employee. You should also establish a separate SEP IRA account for yourself.
Automatic Investment Plan
Automatic investing, also known as dollar-cost averaging, represents a mutual fund installment-purchase plan. It is an easy and efficient method of increasing your investment over the time through the use of mutual funds.
Chain Weighted CPI vs. Fixed Consumer Price Index
Several financial experts have recommended the replacement of the fixed CPI with the Chain-Weighted CPI. This has been suggested as a way for the government to save money.
Mutual Fund Categories
Many potential investors are discouraged from embarking on investing since they find it hard to understand the many financial terms incorporated in the investment world (like the many mutual fund categories).
Securities Exchange Commission - SEC
The stock market crash of the 1929 triggered the need for the creation of an institution to protect the investors for the potential negative consequences and future reoccurrences. The Securities Exchange Commission - SEC was the institution that was established.
Life Cycle Mutual Funds
In the 1990s the first life cycle mutual fund was introduced. It is also known as age-based fund or target-date fund. It was not until recently that lifecycle mutual funds gained great popularity.
Individual 401k Plan
Several changes regarding Individual 401k plans have been implanted. The pension reforms increased the popularity of Individual 401ks by providing more opportunities for maximizing retirement savings.
Solo 401k Plan
This article is directed towards the owners of a business, who are willing and able to establish a 401 (k) plan. The solo 401 (k) plan is the opportunity given to business owners to allocate money for their retirement years.
Dollar Cost Averaging Basics
The reduction of risk through the systematic and periodic purchase of securities is often referred to as dollar cost averaging. The purchase of these securities is done in certain amounts.
Stretch IRA Basics
The type of IRA that is used for the purpose of extending the tax-deferred earnings period is often referred to as a Stretch IRA. There is no specific time at which you should open a Stretch IRA account.
What is a 401k Plan
A retirement plan sponsored by the company on behalf of its employees is referred to as a 401k plan. One of advantages of 401k plans is that they save you money since contributions and profits are tax deferred from both federal and state income taxes.
Investment Asset Allocation
Asset allocation represents the diversification of resources among different types of investments. An investor can disperse his money among such investment classes as:
International Mutual Funds for Your Investment Portfolio
In order to provide for a higher level of diversification and to insure against heavy shocks in the US markets many investors enrich their portfolios by purchasing stocks of international mutual funds.
Value Investors vs. Growth Investors
Investment philosophies can be either concentrating on value investing or on growth investing. You should clarify in which category you fall in order to select the most appropriate mutual funds that meet your investment approach.
How to Calculate Your Net Worth
In order to determine your current financial position it is good to prepare a Net Worth estimation at least once e year. For the calculation of your Net Worth all you need are the liabilities you have and the corresponding assets you have accumulated.
Advanced Directives as Part of Your Retirement Plan
Advanced directives are a must to be included in your retirement plan. You should provide for your potential loss of ability to make independent medical decisions and make the necessary moves to complete an advanced directive.
Education IRA and IRAs for Children Opportunities
Education IRAs represent a type of an IRA account that is opened on behalf of your children. The contributions that are put into the education IRA account are subject to taxation, but the earnings themselves are not only if the money retrieved are for education purposes.
What is a Rollover IRA
IRAs are advantageous in the case your company provides a payout as part of the sponsored retirement plan. By transferring the money into an IRA, you will still enjoy not paying taxes to the accumulated amount.
Spousal IRA
You can open a Spousal IRA account to your spouse in case s/he is unemployed or her/his income is too small and make contributions for their sake.
What is a Roth IRA Account
What is a Roth IRA Account - Roth IRA accounts are a type of savings plan that allows for the allocation of money up to particular limits that are established by the IRS. These contributions are presented as non-deductibles on your tax form.
What is a Traditional IRA Account
Determined as an individual savings account, the traditional IRA allows contributions that cannot exceed a predetermined amount. The contributions are exempt of taxes, which makes IRAs so attractive to many investors.
IRA Basics
IRA (Individual Retirement Account) provides the opportunity to investors to make annual contributions. IRAs are especially beneficial to investors that are above the age of 50.
Enterprise Value Definition and Calculation
The term enterprise value is frequently encountered in the financial literature. This article provides enterprise value definition which will help you to understand how it is calculated the next time you see it an annual report.
What is a 401k Retirement Plan
What is a 401k retirement plan - when signing the contract with your employer s/he may offer you the opportunity to invest in a retirement plan, which is generally known as a 401(k) plan.
Roth 401k
The Roth 401k plan was introduced in 2006 and was initially cover many misunderstanding common for every new introduction. This article will help you determine whether this type of retirement plan is suitable for your financial needs.
401k Contribution Limits Explained
The amount you can contribute to your 401k plan are limited first by the government and then by your employer. It is of high importance to be familiar with the limitations you have on the contributions you can make.
Mutual Fund Fees Glossary
This article provides a mutual fund fees glossary of the main types of costs it is possible to encounter when dealing with mutual funds.
Mutual Fund Style Drifting
The style drift phenomenon is observed whenever the mutual fund deviates from the pre-stated investment objectives or it moves from style to style within the same objective.
Hedge Funds vs Mutual Funds
Hedge funds are frequently recommended as a place for investment whenever the market is going down. Do not fall in the common mistake of considering hedge funds as a type of a mutual fund. They are not!
What is an Exchange Traded Fund (ETF)
Exchange Traded Fund (ETF) constitute an accumulation of securities, which are being traded in an exchange. The way ETFs are traded imitate the trade of stocks and their nature is similar to that of index mutual funds.
Morningstar Mutual Fund Style Box
Generally, the major purpose of a style box is to assist investors in the construction of their mutual fund investment strategies. It was first created by Morningstar, which represents one of the richest data sources for mutual fund information and opportunities.
Solo 401k Plan or Individual 401k Plan
Solo 401k Plans, which are also known as Individual 401k Plans represent an opportunity for individual proprietors and for those who run small business to allocate money for their retirement years.
Tax Refund Transformation into a Mutual Fund
The smartest thing you can do with a tax refund is to use the money to invest. Do not be tempted by the possibility of spending them on something that will not give you any returns.
Mutual Fund Distributions
From time to time the price of your mutual fund will fall. This is absolutely normal especially in cases when the letter “x”, “z”, or “e” stand behind the NAV’s value. This decrease is caused by the execution of distributions by the mutual fund and does not mean that you have lost any money.
Loaded Mutual Fund Loosing Position
When choosing between load and no load mutual funds, always listen to your inner voice and decide on the latter.
12b-1 Fees Warning
Some mutual fund companies have put a hidden trap that you should be aware of when deciding to invest your money, namely 12b-1 fees!
Mutual Funds Turnover Ratio Definition
The turnover ratio presents the trading activity of a mutual fund usually during one year. Generally, high turnover ratios are an indicator of the high expenses of the fund.
Mutual Fund Style Definition
Some of the fund styles are: small growth, mid cap value, large blend, emerging markets, international growth and short term corporate bonds.
Mutual Funds Prospectus Definition
Mutual funds are required by law to provide every potential investor with a prospectus. Additionally, an annual upgrade of the prospectus is obligatory, which have to be distributed among the fund’s existing investors.
What are Mutual Funds
What are Mutual Funds - an investment instrument that allows the accumulation of the money of several investors with the purpose of achieving a common financial objective is called a mutual fund.
Money Market Funds
Money Market Funds - a type of mutual funds that purchases short-term debt securities of banks, corporations, US Treasury Bills and agencies of the US government.
Index Fund
The index fund is a type of a mutual fund that mimics the movement of a stock market fund.
Expense Ratio
The expense ratio of a fund represents its operating expenses during one year, which is presented as a percentage of its average net assets. In the value of the operating expenses should be included distribution fees, management fees and etc.
Annual Return on Investment
Annual return represents the percentage change of an investment for one year, where the dividends, reinvestment of distributions and capital gains should be figured in.
Most Important Mutual Fund Terms
In order to become a successful mutual fund investor it is absolutely obligatory to know the meaning of the following mutual fund terms.
Lifecycle Funds
Lifecycle funds represent funds of funds that are usually offered by large companies. Lifecycle funds may be concentrated on the risk tolerance, which can vary from aggressive, moderate to conservative.
Closed-end Fund
A closed-end fund differs from a mutual fund in that that the letter allows for the purchase of new shares. That’s why mutual funds are characterized as open-ended.
Stock Market Ticker Symbols
Information about the securities is enclosed in the number of letters and the letters themselves. Ticker symbols are applied as a tool of obtaining information about a security and its movement.
How to Calculate Net Asset Value
Net Asset Value (NAV) is widely used when referring to mutual funds. In order to be able to make better investment choices you should be able to understand what stays behind the number of the net asset value and be capable of calculating it for yourself.
Compounding Interest Power
In order to better grab the real essence and power of compounding interest rates, we have created an imaginary situation. It will help you to understand the advantages and impacts of this type of interest on your money
S&P 500 O-Strip Index Definition
Definition - a division of the S&P 500 index, S&P 500 O-Strip Index stocks are listed on NASDAQ and represent around 75 NASDAQ traded stocks.
Mutual Fund Expense Ratio
Mutual fund expenses come directly from your pocket, since they are money, which you could have taken. It is true that they are the needed “evil”, but do you really know how much is exactly your cost for maintaining a particular fund?
Index Mutual Funds Definition
If you are searching for a mutual fund where you can just put your money and watch how they grow, without having to participate in the market, then index funds are the right place to park your money.
Index Creation Methods
Index construction can be done in different ways and it substantially influences the returns on a particular investment. We can identify three main methods:
Stock Mutual Fund Types
Stock mutual funds are also referred as equity funds and enjoy wide popularity among young investors. There are many types of stock funds, so their classification can be done according to different characteristics.
Treasury Inflation Protected Securities (TIPS)
When you want the enjoy the benefits of receiving a monthly income without saying goodbye to your principal than Treasury Inflation Protected Securities (TIPS) may be the financial instrument you are looking for.
Bond Mutual Fund
Bonds represent financial instruments that allow entities to borrow money from the public. This kind of loan is in the form of securities, which are mainly issued by the local or state governments, or big corporations like IBM.
Money Market Mutual Funds
Money market mutual funds’ existence dates back from the 1970s. They enjoy great popularity due to the low degree of risk and good short term returns.
Mutual Fund Types
Selecting the right mutual fund that will match your financial needs is not an easy task due to the myriads of types. The basic types are:
Load Definition
A sales fee charged by some funds is called a load. Loads never present any benefit to your investment, so be sure to put your money in no-load mutual funds.
Closed-end Fund Definition
The basic similarity between closed-end funds and mutual funds (also called open-end funds) is that they both accumulate investors’ money in order to use them for the purchase of stocks and bonds.
Definition of Net Asset Value - NAV
Net Asset Value (NAV) represents the current value of a mutual fund’s share. In order to calculate it first subtract the fund’s liabilities from its assets.