Investment Education

The decision on whether to open a Traditional or Roth retirement account has been a highly debated topic over the years. Both accounts provide substantial tax benefits for eligible participants. In each case, the investor will come out well ahead of those that use neither.

 Investing is a complicated affair. Some love it, some hate it, and most fall somewhere in between. Finding the right balance of comfort and excitement can come a little easier if you mix a balanced fund with your individual stock holdings.

Mutual funds remain one of the most popular investment vehicles, and every year, more and more options become available to individuals. Open-end mutual funds allow investors to pool their money, and an experienced manager will invest in securities on a scale most investors would likely be unable to do on their own. The diversification and experience that an open-end fund provides are very valuable, but many investors demand a different ownership structure. Thus, there is the closed-end fund.

Investors looking for professional asset management have many options, most notably mutual funds, closed-end funds, and exchange trade funds (ETFs).  These three products are very similar in some ways and vastly different in others. 

As a mutual fund investor, do you buy one fund that acts as a unified portfolio or do you build your portfolio from the bottom up, selecting a collection of individual funds?  This sounds almost like that old question of “paper or plastic”.  The obvious answer to the bag question is paper, because it’s biodegradable…  unless you need some cheap plastic trash bags, then the answer is plastic.  So, really, the type of bag you wants depends on some other factors.  The same answer holds true with mutual funds.

Mutual Funds are expected to be managed based upon the fund’s objectives, which are stated clearly in its prospectus. These objectives might state long-term growth of capital, high current income, preservation of capital, or a combination of objectives. 

There are many advantages to mutual funds, and the consensus acknowledges at least four main ones: professional management, diversification, liquidity, and convenience.

A fund essentially represents a pool of investors who combine their money and collectively hire professional management to make investment decisions.  Legally, it is a corporation, or trust, whose sole purpose is the investment of its shareholders’ assets.

Since many people use mutual funds to build wealth over a long period of time, such as retirement savings, a disciplined, regular investment program is an ideal way to meet your financial goals.

Mutual funds are an excellent way to add international exposure to your investment portfolio. Individual stock picking is difficult enough when you’re only dealing with domestic equities. Analyzing foreign companies adds another layer of complexity, as you have to deal with issues such as differences in accounting, language, customs, and currency.