Not all mutual funds are made equal; some great ones have historical returns which are consistently higher than the others. Funds managed by legendary financial gurus such as Peter Lynch needs no introduction. There are also some funds which gives only average and below average yearly returns. Hence, it is certainly important to know some mutual fund basics even before venturing into any investment in mutual funds. It is imperative that the task of choosing the right mutual fund is carried out first by checking out and asking questions on the background of the mutual fund company, their track records and experience.
Some suggested questions that are listed below will help to guide you in checking out on the basics of the mutual fund that you may be interested in and in making the decision to choose the right mutual fund company to invest in:-
1. Check out if the mutual fund company has been registered with the National Securities Commission.
2. As mentioned above, check out how long the mutual fund company has been in business and its historical track records. Check out with the mutual fund agent on the performance benchmark for comparison against other mutual fund companies. This will help to ensure that the mutual fund that you are choosing has a good track record.
3. Check out the mutual fund investment strategy, such as its asset allocation strategy and the companies that the mutual fund has invested in. One of the main reasons for investing in a mutual fund is investment diversification. It will certainly defeat your purpose if the mutual fund is only invested in companies related to only one or two industries.
4. Check out on the different types of funds run by the mutual fund company that are available for you to choose to suit your risks profile. Some funds may be focused on only growth stocks and therefore may be too aggressive and volatile for you.
5. Check out on the mutual fund fees charges imposed, such as sales charge, administrative and management fees, etc.
6. Check out on the”cooling off period” given to investor to reconsider the decision after the initial investment in the company. You may for some reason change your mind and want a full refund off your initial investment.
7. Check out on the procedure for redeeming your investments, especially how long the period after your request for redemption before you can get back your money. You may need your money urgently.
8. Check out how regular you will receive your statement of your investment status. The key to successful investment is the regular monitoring of your investment.
Lastly, ensure that you read and vet through the company’s prospectus. The basics of the mutual fund company can be found in the prospectus of the company. In addition to this, the answers by your mutual fund agent to the questions above can help and guide you in your decision to choose the right mutual fund to invest in.
Seeking Financial Freedom? Work On The Financial Planning Process For The Road To Financial Freedom
Life after Retirement – Ideas for Retirees
Can life after retirement be exciting and interesting? It is an irony that many retirees after striving and working hard so many years to gain financial independence are complaining about boredom and a loss in direction in their lives. Retirement really should be the time to be enjoying the fruits of one’s years of labor and hard work, to relax, to catch up with friends and fellow retirees and pursue a lifelong interest that one has wanted to do but could not find the time during to their hectic working life.
There really are many options and ideas for retirees to consider to turn this phase of their lives into an exciting and meaningful one. Some suggestions include:
1. Be a guardian and a companion to your grandchildren. Many people, especially men did not have the opportunity to bond with their children during their growing years due to their own hectic working life. Children are always a joy to be with. They are often innocent, inquisitive and active. I for one believe that spending time with children will add years to your life. They are God’s great creation.
2. Be a tutor to your grandchildren. Yes, keep your mind active, look back to your grandchildren’s textbooks and be a tutor to them. It’s a great way to keep away the Alzheimer’s disease and to spend quality time with them.
3. Be a tutor to other children. If you do not have any grandchildren, consider tutoring as a home based business for some pocket money for your expenditure. Or consider it as a charity work with a nearby Orphanage’s Home. As mentioned above, it is a great way to keep your mind active.
4. Be a Consultant with your old firm. If the above ideas are not for you, consider the option of being re-employed with your old firm as a Consultant. Your experience may still be an asset and invaluable to your former boss. Your salary may be less but it is certainly will be less stressful than previously when you were a full time employee.
5. Going back to school to strive for a diploma or degree in the field of your interest is also another great way of keeping your mind active.
6. Becoming a volunteer at places such as schools, libraries, religious and other charitable organizations and meeting up with other charitable souls can do wonders and meaning to your life.
7. Going back to full time employment. Of course the one ultimate option to some who are workaholic in nature is to go back into full time employment. For these people, work is matter of choice rather than desperation, other they will find a huge void in their lives.
As highlighted above, there are certainly many meaningful ideas for retirees for them to indulge in during their life after retirement. The retirement years should be the time of your life and there is certainly little time to be bored. As the saying goes, “don’t simply retire from something, have something to retire to”, and you will find your life after retirement to be joyful and meaningful.
There really are many options and ideas for retirees to consider to turn this phase of their lives into an exciting and meaningful one. Some suggestions include:
1. Be a guardian and a companion to your grandchildren. Many people, especially men did not have the opportunity to bond with their children during their growing years due to their own hectic working life. Children are always a joy to be with. They are often innocent, inquisitive and active. I for one believe that spending time with children will add years to your life. They are God’s great creation.
2. Be a tutor to your grandchildren. Yes, keep your mind active, look back to your grandchildren’s textbooks and be a tutor to them. It’s a great way to keep away the Alzheimer’s disease and to spend quality time with them.
3. Be a tutor to other children. If you do not have any grandchildren, consider tutoring as a home based business for some pocket money for your expenditure. Or consider it as a charity work with a nearby Orphanage’s Home. As mentioned above, it is a great way to keep your mind active.
4. Be a Consultant with your old firm. If the above ideas are not for you, consider the option of being re-employed with your old firm as a Consultant. Your experience may still be an asset and invaluable to your former boss. Your salary may be less but it is certainly will be less stressful than previously when you were a full time employee.
5. Going back to school to strive for a diploma or degree in the field of your interest is also another great way of keeping your mind active.
6. Becoming a volunteer at places such as schools, libraries, religious and other charitable organizations and meeting up with other charitable souls can do wonders and meaning to your life.
7. Going back to full time employment. Of course the one ultimate option to some who are workaholic in nature is to go back into full time employment. For these people, work is matter of choice rather than desperation, other they will find a huge void in their lives.
As highlighted above, there are certainly many meaningful ideas for retirees for them to indulge in during their life after retirement. The retirement years should be the time of your life and there is certainly little time to be bored. As the saying goes, “don’t simply retire from something, have something to retire to”, and you will find your life after retirement to be joyful and meaningful.
Value Investing Strategy –Benjamin Graham Investment Strategy to Identify Undervalued Stocks
The central theme about the value investing strategy, so well documented in the Benjamin Graham classic bestseller, “The Intelligent Investor” is about searching and identifying undervalued stocks to buy from the stock market. Although this book was written well over half a century ago, it still remains one of the most important investment books ever written for investors who believed in the fundamental analysis technique for stock selection, in particular, for undervalued stocks.
In his book, the great guru, Benjamin Graham argued that the value investing strategy to identify the undervalued stocks to buy can be carried out based on a just a few simple principles and criteria. Some of his criteria for stock picks for undervalued stocks are interpreted and simplified below:-
1. Firstly, the investor should ensure that the stock price is below two third of the tangible book value of the stock. The tangible book value is the value of the total assets of the company less the total liabilities of the company.
2. The investor should also ensure that the stock price is below two third of the net current assets of the company. The net current assets are the assets of the company that can be immediately converted into cash less the total debt of the company.
3. Thirdly, ensure that the total debt is less than the tangible book value. The rule is that the current ratio, i.e. the current assets divided by the current liabilities must be more than two.
4. The investor should check and ensure that the historical earnings to price yield is higher than the bond yield. The company must also have a history of stable earnings.
5. The company’s earnings must show a rising trend and the earnings must have doubled over the last ten years.
6. One other criteria is to ensure that the company’s dividend yield is at least two third of the bond yield.
Historical records have shown that many fund managers have benefited from the value investing strategy outlined by Benjamin Graham, and so many glowing tributes from successful well known investors, including the greatest investor of all times, Mr. Warren Buffet have been given to this investing strategy.
Therefore, it is without doubt we should be educating ourselves on the above mentioned principles to acquire that important ability to search and identify the undervalued stocks to buy. Needless to say, by applying this proven investment strategy, the probability of success in profiting from the stock market is certainly enhanced.
In his book, the great guru, Benjamin Graham argued that the value investing strategy to identify the undervalued stocks to buy can be carried out based on a just a few simple principles and criteria. Some of his criteria for stock picks for undervalued stocks are interpreted and simplified below:-
1. Firstly, the investor should ensure that the stock price is below two third of the tangible book value of the stock. The tangible book value is the value of the total assets of the company less the total liabilities of the company.
2. The investor should also ensure that the stock price is below two third of the net current assets of the company. The net current assets are the assets of the company that can be immediately converted into cash less the total debt of the company.
3. Thirdly, ensure that the total debt is less than the tangible book value. The rule is that the current ratio, i.e. the current assets divided by the current liabilities must be more than two.
4. The investor should check and ensure that the historical earnings to price yield is higher than the bond yield. The company must also have a history of stable earnings.
5. The company’s earnings must show a rising trend and the earnings must have doubled over the last ten years.
6. One other criteria is to ensure that the company’s dividend yield is at least two third of the bond yield.
Historical records have shown that many fund managers have benefited from the value investing strategy outlined by Benjamin Graham, and so many glowing tributes from successful well known investors, including the greatest investor of all times, Mr. Warren Buffet have been given to this investing strategy.
Therefore, it is without doubt we should be educating ourselves on the above mentioned principles to acquire that important ability to search and identify the undervalued stocks to buy. Needless to say, by applying this proven investment strategy, the probability of success in profiting from the stock market is certainly enhanced.
Financial Education for Children
Isn’t it an irony that we teach our children to read and write but disregard the importance of a financial education for them? Isn’t imparting and teaching money management skills and knowledge to our children just as important for them to be ready to face the reality of the real world we live in?
Due to the ease of obtaining credit cards these days, there are now more reports of youths in their twenties and early thirties in position of debts than ever before. It is due to such a scenario that it is imperative that children of today are taught to be financially literate with the right money management skills.
The following steps could be taken to educate your children on basic money management:-
1. Start off by setting up a savings account for them. Give them an allowance, an amount slightly more than their daily estimated expenditure so that they put into their piggy bank that little extra daily. Explain to them that they should put aside say perhaps 10 to 20% of the allowance given. Set them a target to open an account in the nearby bank and later a target monthly savings. Even if that little amount is just ten cent per day, you will be surprise how quickly their savings will grow. The children themselves will be pleasantly surprised. Reward them if they meet their monthly target. This way, good saving habits can be inculcated into them early in life.
2. Introduce them to the game of Monopoly and other cash flow games that are available in the market. These games are a good way to educate them on the basic principles of budgeting and the understanding of incomes and expenditures for purchases.
3. Encourage them to take up part time jobs during their school break to earn some income and extra pocket money.
There are many books written to guide and assist you on a financial education for your children but since this subject is not a syllabus in the most school curriculum, it will be up to you to take the necessary initiatives in teaching the necessary money management skills to them to pave the way for them to gain financial independence early in life.
Due to the ease of obtaining credit cards these days, there are now more reports of youths in their twenties and early thirties in position of debts than ever before. It is due to such a scenario that it is imperative that children of today are taught to be financially literate with the right money management skills.
The following steps could be taken to educate your children on basic money management:-
1. Start off by setting up a savings account for them. Give them an allowance, an amount slightly more than their daily estimated expenditure so that they put into their piggy bank that little extra daily. Explain to them that they should put aside say perhaps 10 to 20% of the allowance given. Set them a target to open an account in the nearby bank and later a target monthly savings. Even if that little amount is just ten cent per day, you will be surprise how quickly their savings will grow. The children themselves will be pleasantly surprised. Reward them if they meet their monthly target. This way, good saving habits can be inculcated into them early in life.
2. Introduce them to the game of Monopoly and other cash flow games that are available in the market. These games are a good way to educate them on the basic principles of budgeting and the understanding of incomes and expenditures for purchases.
3. Encourage them to take up part time jobs during their school break to earn some income and extra pocket money.
There are many books written to guide and assist you on a financial education for your children but since this subject is not a syllabus in the most school curriculum, it will be up to you to take the necessary initiatives in teaching the necessary money management skills to them to pave the way for them to gain financial independence early in life.
Value Averaging Investment Strategy
To avoid getting trapped into following the herd mentality of the market, it pays to check out the investment strategy known as value averaging, a systematic investment strategy for a higher rate of return. Although this value averaging strategy has been around for some time, it is probably true to say that many investors are not aware of its existence. Due to better promotion by financial planners and mutual fund agents, the dollar cost averaging strategy has always been the better known and more popular investment technique among investors.
It is always a wonder to me that despite the promotion of safe and tested investment strategies such as the dollar cost averaging and value averaging, there are still so many sob stories in the financial market of retail investors losing heavily in the stock markets, investors who had allowed themselves to be trapped into following the psychology of the market by buying high due to the greed factor and then selling low due to the fear factor.
Value averaging may be the lesser known version of the investment strategies, but it would be advantageous to know that research has shown that this strategy gives a higher investment rate of return than dollar cost averaging for the reasons listed below:-
1. One major reason is that this value averaging investment strategy takes dollar cost averaging one step further. Besides buying low, this strategy also gives signals to sell when the market soars. This strategy systematically shows you how to make the buying and selling of your investments nearly automatic, therefore relieving you of the need for market timing and stock picking skills.
2. Due to the buying and selling mechanism of this strategy, for investment over a longer time period, the total cost per share with this technique is therefore always lower. Generally therefore, it has been shown to have a higher rate of return than the other investment strategies.
It is my belief that understanding and implementing the available investment techniques are vital in the financial education process. Value averaging as a systematic investment strategy therefore should not be excluded as a financial topic in schools and colleges. Taking advantage of its tested and proven ability to generate a better investment rate of return will certainly go a long way in helping you to achieve your financial planning objectives.
It is always a wonder to me that despite the promotion of safe and tested investment strategies such as the dollar cost averaging and value averaging, there are still so many sob stories in the financial market of retail investors losing heavily in the stock markets, investors who had allowed themselves to be trapped into following the psychology of the market by buying high due to the greed factor and then selling low due to the fear factor.
Value averaging may be the lesser known version of the investment strategies, but it would be advantageous to know that research has shown that this strategy gives a higher investment rate of return than dollar cost averaging for the reasons listed below:-
1. One major reason is that this value averaging investment strategy takes dollar cost averaging one step further. Besides buying low, this strategy also gives signals to sell when the market soars. This strategy systematically shows you how to make the buying and selling of your investments nearly automatic, therefore relieving you of the need for market timing and stock picking skills.
2. Due to the buying and selling mechanism of this strategy, for investment over a longer time period, the total cost per share with this technique is therefore always lower. Generally therefore, it has been shown to have a higher rate of return than the other investment strategies.
It is my belief that understanding and implementing the available investment techniques are vital in the financial education process. Value averaging as a systematic investment strategy therefore should not be excluded as a financial topic in schools and colleges. Taking advantage of its tested and proven ability to generate a better investment rate of return will certainly go a long way in helping you to achieve your financial planning objectives.
Guide to Retirement Planning
Planning your own retirement can indeed be a daunting task. But it will be worth the effort if you if at the end of the day you are able to achieve your retirement goals. The five steps guide to the retirement planning process listed in the following paragraph may help to direct you towards your retirement goals.
1. Firstly, decide at what age you would wish to enter into semi-retirement and later full scale retirement. Estimate the length of your retirement period by computing against the present average lifespan for your gender. This can be done by checking the mortality tables provided by most insurance companies.
2. The second step is to identify your other financial needs such as tertiary education for your children, your dream home, etc. This will help you to estimate the financial quantum you required.
3. Carry out a net worth analysis of your present assets and liabilities followed by a cash flow statement analysis. If you are in an enviable position, you could move on to the next step to commence your investment planning to achieve your financial needs identified in step 2. Otherwise, you would need to draw up a debt management program to clear off all outstanding debts and start saving until you have a 6 to 9 months buffer for your daily expenditure before starting on your investment planning.
4. Step 4 includes knowing your investor’s risk profile. This step also includes educating yourself on the different investment options available. Otherwise you may engage a financial planner to draw up a long term investment program for you. Understand that to ensure the value of your hard earned savings is not beaten down by inflation and to achieve your retirement goals, investment risks has to be taken to ensure a superior rate of returns. This can be done by investing in investment vehicles such as a mutual fund.
5. The fifth step involves carrying out an insurance needs analysis. You will never know what happens tomorrow. Insurance is a wonderful tool to utilize to manage your investment risks until you achieve your financial goals.
The 5 steps guide to retirement planning process stated above are the basic fundamental procedure that you will need to follow. It will certainly require some discipline and sheer determination but like the saying goes, everybody will have to retire someday whether they like it or not. Hence, planning your retirement is a necessity rather than an option to ensure that you have enough in your retirement nest to see you through old age and quality lifestyle in your retirement years.
1. Firstly, decide at what age you would wish to enter into semi-retirement and later full scale retirement. Estimate the length of your retirement period by computing against the present average lifespan for your gender. This can be done by checking the mortality tables provided by most insurance companies.
2. The second step is to identify your other financial needs such as tertiary education for your children, your dream home, etc. This will help you to estimate the financial quantum you required.
3. Carry out a net worth analysis of your present assets and liabilities followed by a cash flow statement analysis. If you are in an enviable position, you could move on to the next step to commence your investment planning to achieve your financial needs identified in step 2. Otherwise, you would need to draw up a debt management program to clear off all outstanding debts and start saving until you have a 6 to 9 months buffer for your daily expenditure before starting on your investment planning.
4. Step 4 includes knowing your investor’s risk profile. This step also includes educating yourself on the different investment options available. Otherwise you may engage a financial planner to draw up a long term investment program for you. Understand that to ensure the value of your hard earned savings is not beaten down by inflation and to achieve your retirement goals, investment risks has to be taken to ensure a superior rate of returns. This can be done by investing in investment vehicles such as a mutual fund.
5. The fifth step involves carrying out an insurance needs analysis. You will never know what happens tomorrow. Insurance is a wonderful tool to utilize to manage your investment risks until you achieve your financial goals.
The 5 steps guide to retirement planning process stated above are the basic fundamental procedure that you will need to follow. It will certainly require some discipline and sheer determination but like the saying goes, everybody will have to retire someday whether they like it or not. Hence, planning your retirement is a necessity rather than an option to ensure that you have enough in your retirement nest to see you through old age and quality lifestyle in your retirement years.
Subscribe to:
Posts (Atom)