What is bankruptcy?

Sometimes, it is a simple fact that we fall on hard times. No one wants to have bills that they cannot pay, and things that they cannot do. Because sometimes people tend to get in over their heads and have too much to do when it comes to paying things, and because sometimes people reach certain point where they are unable to get themselves out of debt, and unable to figure out a way to pay the things that they owe, there is a financial state called bankruptcy that can be declared.

There are two main purposes of declaring bankruptcy. The first purpose is to give someone in debt a chance to start over again, by relieving them of most of their debts. The second purpose is to allow the creditors to be able to get their money in whatever way that they can.

The idea of bankruptcy basically allows people who have run into more debt than they can pay off a way to get back to their lives and to get out of the hole that they have created. It also protects the people that are owed money, by giving them means to get that money.

When you declare bankruptcy, you are allowing yourself the option to repay the debts that you have through any means that you have, or any assets that you might have. Basically, this means that whatever you have can be used to pay back your debts, and then you are going to no longer have those debts, so you can start over. It is really the best way for both parties to be able to get what they need.

However, even though bankruptcy allows you to be able to pay back your debts, and allows the people who you owe money to get that money, there are going to be consequences. Even though you are going to be paying back what you owe, this means that you are going to have little money at all, you are going to have to start from scratch. This means that you will have to rebuild your credit from scratch and you might not be eligible for any loans for quite sometime. Keep these things in mind however, because even though it’s important to get out of debt, you are still going to have consequences to your credit and to your life. Bankruptcy can make it hard to get a mortgage, buy a car, qualify for student loans, and many other things, so before you declare, consider your options carefully.

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What Bankruptcy Cannot Do

Bankruptcy is a way for you to officially and publicly declare your inability to deal with the creditors who have lent you money in the past. Bankruptcy is a great option when nothing else works, including debt consolidation and other financial techniques. However, it is always important to remember that bankruptcy is not the easy way out. In fact, bankruptcy is not a good choice for most people. Many are confused with how bankruptcy works, and if you do not fully understand it, you should talk to a financial professional so that you can learn what bankruptcy can and cannot do.

For starters, bankruptcy cannot save your property if you have used it for collateral. For example, if you have a mortgage, you have promised your lender that if you do not pay back the loan, you will leave your home and it can be sold by the lender. If you can declare bankruptcy, that doesn’t change. The same goes if you used a car, engagement ring, or other asset as collateral. What bankruptcy does do is stop the lender from pursuing more money after they have collected the property in question.

Bankruptcy can get rid of curtain debts, but one thing that it cannot get rid of is child support payments or alimony obligations. Children will belong to you forever. No financial institution can rid you of this responsibility, because your financial obligation to them is for their benefit. Alimony payments are the same way—they survive bankruptcy. If you file chapter 14 bankruptcy, you will have to include child support and alimony repayment in full. Anything less is illegal.

Other types of debts that survive bankruptcy are student loans and tax debts in most circumstances. It depends on your specific financial situation and the efforts you’ve made in the past to repay those debts. The court will decide what you will and will not have to repay in these cases. There are other debts that call in this category, including fines and penalties given for criminal offenses, traffic ticket bills, debt for personal injury due to intoxicated driving, and debts that you forgot to include on your bankruptcy list.

Bankruptcy is not easy and it is a not a way to give up your responsibilities. You may be able to cancel some of your debts this way, but not all of them. You also will have to deal with bankruptcy well into the future. Before you declare bankruptcy, you should learn what bankruptcy can and cannot do so that you are well prepared.

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The Truth Will Set You Free

If you are having money problems, one option that you have for repaying your debts is to declare bankruptcy. Bankruptcy is not always the best option; in fact, it should only be used as a last resort. It is, however, a good option for some people. If you do declare bankruptcy, it is very important for you to tell the truth completely. There is no need to rush the system. Take all the time you need to make sure that your information is fully complete and accurate. If you don’t tell the truth, it will come back to hurt you later in life, no matter how careful you may be.

Of course, mistakes happen. If you forget to list something when declaring bankruptcy or otherwise misrepresent yourself and it was an honest mistake, the court will probably ask you to make the correction and warn you to be more careful. However, if you make too many mistakes, it will be evident to the court that you were careless when filling our your paperwork. If you are careless, the court could dismiss your case entirely, even if you weren’t attempting to defraud your lenders by declaring bankruptcy when you didn’t have to just to avoid debt.

Remember that bankruptcy doesn’t allow you to play favorites. If you owe money to a relative’s business or happen to be friends with the owner, you still have to list the business when you declare bankruptcy. The purpose of bankruptcy is to make sure that all of your lenders get an equal share of the money and assets you do have. The court will discover that you have debts with these people, and your case may be dismissed or you may come under full review. In that case, other things you have left out when declaring will also come to light.

You must also remember to list any money that you do not yet have in your physical possession but that will be yours in the near future. For example, if a relative has recently died and left your money or property, but the will has not been executed yet, you will still have to list this asset.

Trying to hide assets is also illegal. If you own property, like land or jewelry, don’t try to put it in relatives’ names or otherwise quickly dispose of it. This offense could wind you up in jail and you’ll have huge fines to pay on top of the debt you already owe! Instead, simply be honest from the beginning. If you don’t know what your specific obligations are, talk to a lawyer or financial professional.

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The Importance of Setting Goals

Most people find that financial troubles happen occasionally. This is especially true if you are young and just starting out in the world. One of the options you have for getting out of debt is bankruptcy. However, this is not the best option, nor should it be done by the majority of people. Bankruptcy is the legal declaration that you cannot pay back your debts and do not see a way to do so in the future, at least not in fully. Individuals can declare chapter 7 or chapter 13 bankruptcies depending on how much debt has been acquired and how much money is made every month. An important part of this financial process is setting goals. By setting goals you can both stay out of debt and reduce the risk of having to declare bankruptcy and rebuild your credit after you’ve already declared bankruptcy. Your guidance counselor in junior high wasn’t kidding—if you set goals and reach for them, you can live a happy and successful life.

You should begin setting goals as soon as you are responsible enough to start making your own financial decisions. For most people, this occurs around the time of high school graduation. Set aside a savings account into which you can deposit money but from which you will not withdraw money unless you have an emergency (and beer money is not an emergency!). Make this your first goal. Depending on how much you work, set a number you’d like to save in a year’s time. Try to exceed that number if you can.

Take that goal setting with you as you been to accumulate debts. It’s a good idea to have at least one credit card, but a financial goal that makes a lot of sense is to pay off this credit card in full every month. This will help you begin to build credit without putting you deeply into debt. If you find yourself overwhelmed with bills every month, set goals as to how to save money by reducing spending. All of this will help you to manage your debt and you hopefully won’t have to declare bankruptcy.

If you have declared bankruptcy in the past, however, it is important to help yourself set new goals to once again begin building a good credit history. You should do this by working to pay the debts you have that were not dissolved due to the bankruptcy. If you fall behind on those payments, work with your lenders to negotiate a better deal. You can also slowly begin saving money again, using the technique you used before bankruptcy. When you set goals, you show others that you are trying to improve your financial situation and that you can be responsible with money.

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Kicking butt in Mutual fund investing

For all investors, both new and old, getting a leg up is a big deal. While there is no magic formula to guarantee that you’ll never lose your money in investing, there are a series of common sense tips that will help you avoid common traps in mutual funds that can lead to you meeting both your short and long term investing goals.

A good first tip is to watch the fees and expenses. While 1 percent here and 2 percent there may not seem like much, those fees are coming right out of your profit, so keeping them at a minimum is very important. Try to stick to no-load mutual funds, they have fewer fees than load funds. Also, watch the management fees that a company charges on their funds. These vary a lot from company to company.

Have a good idea what the tax implications are on your mutual funds. There is more than just capital gains tax out there, and the amount of tax, when your fund is taxed and how it’s taxed can vary. The amount of tax you have to pay also depends on what tax bracket your income falls into. Make sure you understand all the ins and outs of taxes before you choose a fund to invest in.

Take a look at how large the mutual fund is and how long it’s been around for. The size of the fund matters because the bigger the fund, the less impact one individual stock has. If the fund has grown from the previous year, take that into consideration when checking last year’s performance reports. It’s possible that last year’s results were because the fund was smaller and the performance of one stock, either up or down, had a much larger impact on the fund.

Finally, make sure you understand the volatility of the fund. While the old adage rings true that you can’t win the game unless you play, you can still invest in mutual funds and seriously limit your risk. It all depends on what your financial goals are and how much risk you feel comfortable taking. If your goals are close, than you might want to invest in lower risk funds. If your goals are far off into the future, you can afford to take more chances.

The world of mutual funds can be exciting and fun for new investors. But no matter how much money you’re making, you must remember that it can all go sour. But with the proper knowledge and preparation, you can have a long and successful career in mutual fund investing.

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Investing during an unstable market

There are many buzzwords associated with investing, words that, as an investor, you’ll probably get sick of after a while. You can only listen to so much advice telling you to be disciplined when you just got a hot tip that Fidelity Investment’s mutual fund is about to explode. One of those buzzwords that people hate to hear is market volatility. Volatility is a part of investing, plain and simple. If that concept makes you feel queasy, join the club. There have been patterns over the years in the Dow and the Nasdaq where a slow and steady climb happened. Most of the mid to late 1990s saw a slow and steady rise in the markets. The only real blemish on the market during that time was the mini-crash of 1997. Even then, the market showed a gain for the year.

So, how do you cope with market volatility? There are many different strategies that are used, and most of them include investing discipline. Studies have shown that during periods of extreme market volatility, like after the attacks of September 11, the market has rebounded and gone on a bit of a run. A great way to deal with volatility like that is to move some of your money into funds or stocks that might be a little lower risk and focus on blue chip stocks. When you and your broker feel that the market is at or near the bottom, you can invest in technologies or companies that you feel will be in high demand in the near future. Just because the market is doing its best yo-yo impersonation, is no reason to take your money and go home.

Another common practice is known as dollar-cost averaging. This is the practice of waiting until a particular stock that’s going through a rough period and waiting for it to bottom out. While the exact time of a stock bottoming out is unknown, most wait until the stock sets a record low, and then they pour thousands of dollars into that stock. The same technique can be used with the market as a whole. If the Dow is experiencing a series of bad days, some investors with withdraw all their money, wait for the Dow to set a 30 or 60 day low, and then shove everything back in at once. While there is no guarantee of this working, it’s been a common practice recommended by brokers the world over for generations.

Dealing with market volatility isn’t easy, but it is part of investing. If you’re a smart investor, however, market volatility won’t mean the end of your investment.

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How to cash in your funds

Well, you’ve played the market like an expert, researched exactly the right mutual fund for you, and the fund that you’ve taken under your wing is showing a big, fat profit and you want to use a little of that money to go buy something nice. But how do you get your money back that is in the fund? And what sort of fees will be associated with that? Let’s take a look.

One of the best aspects of mutual funds is that they are “liquid”. That means that you can change your cash into mutual funds and back to cash right away with no delays. For many investors, especially first time investors who may not have a lot of extra income, liquidity is extremely important in an investment. If you need quick access to your money, you get it with mutual funds.

In some cases, you won’t even have to cash in your funds to use the money that is in them. A few different types of mutual funds, such as some fixed-income mutual funds and most types of money market mutual funds come with the ability to write checks against the money in your mutual fund. These are exactly like the checks your credit card company sends you. You’re writing a check that will be withdrawn from the amount you have invested in your mutual funds.

Many different mutual funds offer a program where you can contact the fund either over the Internet or by phone and let them know that you want to cash in a percentage of your holdings. While this transaction can take a few days, the mutual fund company will immediately transfer the cash value of your transaction into an account that you’ll have checks for. So while it may take a few days to cash in your shares, you will have instant access to the money in your account.

A final way that people usually withdraw money from their mutual fund is by a bank wire transfer. You simply tell the fund that you want to take some money out and they will wire it to your savings or checking account. Many funds, however, do require this request in writing and you will have to get an authorized form through your bank that can be sent to your mutual fund. This is done mainly to prevent fraud.

As you can see, taking money out of a mutual fund is quick and easy. The liquidity of mutual funds may be their strongest point since you know your money won’t even be out of reach when you need it.

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How much will college cost?

When you think back, the days of sitting in your dorm room debating the merits of your schools football team don’t seem that far away. But before you know it, little Billy and Sally are going to be headed off to the same hallowed halls that you once ran amuck in.

Of all the goals that people save and invest to meet, the college education of their children is near the top of the list. While you may still be paying off your college loans, getting an idea of how much school will cost for them is a valid concern.

Taking a look at the cost over the last few years, prices are continuing to go up. While the average increase per year is about 5 percent, from 2003 to 2004, public universities and colleges raised their tuition by a staggering 14 percent in one year. That is more than four times the current rate of inflation.

Assuming you didn’t choke reading that last paragraph, what can you do to try to figure out what college will cost for your kids? Well, the first step is trying to figure out which kind of school little Billy or Sally will want to attend. The least expensive choice would be an in-state, public university. The average cost of these in 2005 was around $67,000 for four years. And that is assuming that your child graduates in four years, most students these days do not.

The next choice up the ladder is attending a public school out of state. This can be a good choice if your child shows an aptitude for a major that another school out of state is highly regarded in. The average cost in 2005 for four years at an out of state public school is around $100,000 dollars.

The most expensive but some believe the best option would be a private university. These schools don’t figure in residency into their tuition numbers. For four years at a private school in 2005, the cost was around $137,000. Also, you should take into consideration majors, such as medicine or law, which take more than four years.

A final tip to consider is that these days, a bachelor’s degree is worth less and less. Graduate school is becoming more and more common just to be able to get a good job. And the tuition rates charged for grad school are usually much higher.

Paying for college isn’t easy. But with sound financial planning and a good knowledge of what it will cost in the future, saving for school doesn’t have to be as nightmarish as you think.

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The Chapter 7 Bankruptcy Timeline

Bankruptcy is when you legally declare that you can no longer repay your debts. Individuals have the choice of either declaring chapter 7 or chapter 13 bankruptcies, depending on the severities of their debts and the incomes being made. Of most, chapter 7 bankruptcy makes the most sense, although you should consider both carefully and do what is right for your. However, if you do declare chapter 7 bankruptcy, here is how it will play out:

First, your declaration officially begins when you sign the paperwork and file the proper documents with a bankruptcy court. In most states, you have to finish a counseling course regarding bankruptcy so that you can be sure this is the correct option for you. This can be done no longer than six months before file your paperwork. Upon filing, your wages will no longer be garnished and your creditors can no longer proceed with legal actions against you or, in most cases, even call you regarding your debt. The court will contact your creditors.

Next, you must meet with your creditors in what is called the 341 meeting. Creditors may or may not choose to attend, but you must be there. A trustee will be assigned to your case and presides. This meeting will typically only last five minutes, and creditors usually do not show up. Afterwards, your trustee will sell any of your possessions that are nonexempt. Creditors have up to 90 days to then file claims. A bankruptcy lawyer will be assigned to help you through this process.

After the 90 days are over, or after all of your creditor have files their claims (whichever comes first), you will be discharged and all of your debts will be written off, except certain exceptions, like student loans and child support payments. Other debts that cannot be wiped clean from your slate include alimony obligations and taxes.

Be aware that most of your possessions can be sold when you file for bankruptcy and will be sold rather quickly. In many cases, it is better to sell them yourself for more money before you declare bankruptcy and use them to help pay off debts. If you can do this effectively, you might not have to declare bankruptcy at all. If you can, look for options to avoid bankruptcy. You have choices, and debt counselors can help you figure out a financial plan that is right for you.

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Is Bankruptcy Right for you?

Bankruptcy is a financial practice that allows you to officially declare that you cannot repay your debts now and do not see how it will ever be possible in the future. Declaring Bankruptcy is a big step. For some people, there are other ways to get out of debt, like debt consolidation or negotiating with your lenders. However, if your best option for getting out of debt is bankruptcy, than you should take steps to make this financial situation work in the best possible way for you. A financial profession can help you do that. In any case, before you jump into anything, you need to fully decide if bankruptcy is right for you.

First, it is important to learn as much as you can about bankruptcy. For individuals, chapter 7 and chapter 13 are the two types of bankruptcy that can be filed. There are other options for businesses and entities. Learn the difference between the two so you can see how they work. If bankruptcy is right for you, you must be aware of your obligations and your lenders’ choices.

Once you have learned all you can about bankruptcy, take a moment to consider other options. For example, you can consolidate your debts into one large monthly payment. If you are considering bankruptcy because you just barely miss paying off your bills on time every month or if you feel overwhelmed by credit card debt, this may be a great option for you. You can also try doing nothing and living simply for a number of years, which works well if you have no family for which you are responsible. Another options is negotiating with your lenders. In the end, there are many different options other than bankruptcy, so make sure that your second step is to consider them all.

Next, check out the requirements for eligibility for declaring bankruptcy. If your debts are too high and your income too low, you probably will not qualify for chapter 13 bankruptcy. On the other hand, if your income is too high and your debts too low, you probably will not qualify for chapter 7 bankruptcy. In some cases, you may not qualify for either, and this is a sign that you did not think through your other choices.

Consider all of your property and debts if you do qualify. What will happen to your home? Your car? Your retirement plan? Every state has different specification when to comes to this, so make sure that you understand how your property will or will not be taken. Also, it is important to begin compiling lists of your assets and debts. Remember that some debts cannot be wiped out, like child support payments.

Once you have all your information compiled, you can begin the declaration process. It is best to work with a lawyer or financial professional to complete this task, and remember to always be completely honest. Declaring bankruptcy is not for everyone, but it can work for some people.

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Where can you buy mutual funds?

For those that are new to investing and have decided that mutual funds are the way to go, the next logical question is how do you go about purchasing them? There are many different ways to go about investing in mutual funds, and you have several different options to choose from.

One of the most popular ways to buy mutual funds is directly from the companies. The type of fund you want to look for is a no-load mutual fund. No-load funds are free from fees and additional costs that load funds tend to have. Since you’re going directly through to the fund company, you will save a transaction fee that you would normally have to pay through a broker, and since you aren’t paying any fees, all of your money goes towards investing.

Going about investing directly is easy. Once you’ve chosen the company you want to deal with, you simply fill out an application, enclose a check for the amount you want to invest and mail it in. It couldn’t be easier.

Another popular way to buy mutual funds is online through a broker or through a mutual fund superstore. Most of these online superstores like T. Rowe Price or Wells Fargo (there are many others, as well) don’t charge any transaction fees for their services because the fund you end up buying will reimburse them. Be careful though, these online superstores often sell funds that do carry transaction fees or they carry load mutual funds that can come with some steep fees of their own. Make sure you read all the fine print and know what you’re investing in before you buy it.

Maybe the most common way of buying mutual funds is through your work’s retirement program. Your 401(k) account is most likely tied to mutual funds so you may already be a seasoned mutual fund investor and not even know it. To find out more about the funds your retirement plan invests in, you can visit the website of the fund that your 401(k) invests in.

If you have signed up for a 529 College Saving Plan, than you’ve bought into mutual funds. These brand new plans are made for families who are trying to help their kids through college. Their main benefit is the tax laws that are used for withdrawals from the plan. In most cases, if money is taken out for education expenses, it’s tax free. This is an ideal plan for most families who are worrying about paying for college.

A final way that you can invest in mutual funds is with a financial advisor. While this way would be a bit more costly since you would have to pay the advisor, you are bound to make the best mutual fund investment choice for you.

Buying mutual funds in this day and age of the Internet is easier than it has ever been. But be careful, make sure you crunch the numbers and make an educated choice and you can be well on your way to financial freedom with mutual funds!

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What is your risk tolerance?

One of the biggest parts of investing is determining your own risk tolerance. When most people think of risk tolerance, they think, “How much can I stand to lose before I start to struggle.” Risk is a huge part of investing because it dictates what sort of mutual funds you can put your money into, how much money you can invest and for how long. Knowing your risk tolerance is one of the biggest keys to successful investing.

Risk is usually defined as short term volatility in prices or variability in prices. But there is a whole other kind of risk at the other end of the spectrum. The risk of not meeting your goals by investing. The main reason why anyone begins to invest is to meet goals that they have set for themselves. The most common goal in investing is saving money for retirement or for that second home. Risk goes both ways, there is the chance you could lose your shirt with an investment, and the chance that if you don’t take enough risks, you won’t meet the goals you’ve set for yourself.

The first thing you need to do is to take a personal assessment of your own risk and develop what is known as an investment personality. Everyone’s personality will be different, they are unique like fingerprints. Some investors can stand to take some big chances now with the lure of a potential payoff down the road, while others who may not have much time between the time they start investing and the point where their financial goals need to be realized and can’t take big risks. A good barometer to judge what your risk will be is how will you feel in your capital goes up, down or stays the same? Are you willing to be patient and accept small increases, or do you want to see the most possible movement? If you’re sitting at your computer right now ringing your hands in fear that you might lose money on your investment, you should already be able to tell exactly what sort of investor you are.Assessing both ends of your risk tolerance is quite possibly the most important single financial decision you can make. Knowing how much money you can invest, how long you need to invest it for and what kind of mutual funds you want to buy into is very important. Once you determine your own risk tolerance, you will be ready to take the next step and start investing.

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What is automatic investing?

For many, the idea of investing in mutual funds, stocks and bonds is appealing, but it all seems too complicated. Too much jargon, too much danger, too much hassle. Thankfully, the companies that run mutual funds know this and have come up with a way for new investors who may not have a big wad of cash to invest right off the bat.

It’s called automatic investing and it is highly recommended for those new to mutual funds and for those that want to invest but don’t have a lot of up-front funds.

Automatic investing is done through a mutual fund company, and what happens is, you sign up to purchase a set amount of funds either every month or every few months (usually quarterly). You buy a bit at a time, whatever you feel you can afford, and your shares are managed by the mutual fund company. It is a great way to watch a nest egg form from money you didn’t even know you had.

A great part about automatic investing is that most mutual fund companies are so excited to get new investors in, they will waive most if not all transaction and investment fees for those that are signing up for automatic investing. They understand you may not have a lot of extra cash to throw away on fees and they want you to get your feet wet with mutual funds.

Maybe the best part about automatic investing is that it is a very disciplined form of investing. Instead of opening up an E-Trade account and investing from your home computer, an investment expert at the mutual fund company that you invest in will handle your shares and in this case, it is probably best to let the experts handle it. It’s extremely tempting to chase mutual funds when investing yourself. You hear the latest news about funds that may be surging and its tempting to take your money and jump on the hottest fund, but disciplined, long-term investing is a much more beneficial way to go.

Whichever company you choose to use for automatic investing will supply you with a prospectus that will outline all of the fees that may or may not be associated with your account. This is key since you’ll need to know what any possible cost might be for things like early withdrawals.

For many, automatic investing takes the guesswork and the fear out of mutual fund investing by allowing a large amount of money to build up over time. Contact a mutual fund company to see if automatic investing is right for you!

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What is a Roth IRA?

The choice of mutual funds and investment opportunities available that you can out your money in is mind boggling. There are literally hundreds of funds, all with different goals and different amounts of risk. One of the most well known and popular investment choices is known as the Roth IRA. But what is it and how do you invest in it?

The Roth IRA is a retirement account that uses stocks, mutual funds and securities to help people earn money for their retirement. They are open to invest in, but there are guidelines that you would have to meet that are set by the Internal Revenue Service.

One of the major plusses to having a Roth IRA is the way the taxes involved with the account work. When people deposit money into their Roth IRA, it is from money that has already been taxed, usually from income earned, and when you need to take money out, anything up to the amount that was contributed, is tax free. If you need to take out more money than you put in (money that was earned in the IRA), it is tax free in most situations.

If you chose to use a regular IRA, there is no guarantee that the money you deposit into the account will be tax deductible (some of it is, some of it isn’t, it depends), and when you choose to take money out, it will be taxed. An additional bonus to a Roth IRA over a normal one is that there are fewer barriers stopping you from taking the money out of the account once you’ve put it in.

The biggest negative to using a Roth IRA to help with retirement is that the money you contribute into your account is not tax deductible. Another downside to the Roth IRA is that there can be major penalties associated with withdrawing your earnings too early. There are, however, many, many exceptions to these penalties, like buying a home for the first time, or withdrawing money to pay for college or even your children’s college expenses.

Overall, a Roth IRA is a fantastic choice for those looking to retire and shield a vast majority of their retirement savings from taxes. While there are fees for early withdrawal, the benefits of the Roth IRA far outweigh the potential costs as seen by the soaring popularity of this investment choice.

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What is a prospectus and how do I read it?

When you first buy into a mutual fund, most people have a thousand questions. How has the fund performed in the past year? How do the fees work and which ones do I have to pay? Are there any penalties for withdrawing my money early? What happens if the fund goes out of business? All the answers to these questions are listed in what is known as a prospectus.

A prospectus is simply a book or pamphlet that lists all the information about a fund. Every mutual fund company gives out a prospectus, and sometimes, if the performance for a particular fund hasn’t done well recently, it will even come with bad news about that fund. A prospectus must be accurate. The United States Securities & Exchange Commission checks on the validity of the statements in all financial documents released by investment firms to make sure they are honestly showing people what the fund has done and what they think it will do.

When you open the front cover to a prospectus, they usually hit on three different topics right off the bat: the fees that this fund charges, the objectives of the fund and the performance of the fund. While there are other concerns when you look at a prospectus, these three things are the most important.

Most companies will present the fee schedule in an easy to read graph. Remember, the fund must disclose all fees, there can’t be any surprises.

A mutual fund prospectus is also required by the SEC to list their performance. They must list this information, even if it’s not up to the expectations of the fund. It can usually be found within the first few pages of the prospectus. Most of this data is presented in the form of a table so that reading it and understating it is simple. Also, there is no shame whatsoever in asking questions. Every investor had to start somewhere and if you don’t ask questions about a particular mutual fund before investing in it, you might just be throwing your money away.

There will likely be more information in your prospectus as well, including profiles of the managers that handle the fund, as well as the founders of the investment company and so on.

A prospectus is like a bible for whatever mutual fund you choose to invest in. With oversight provided by the SEC, a prospectus must be a honest document that shows you exactly what you’re getting yourself into with every mutual fund.

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Understanding mutual funds in the newspaper

We’ve all seen the financial pages in the newspaper. Usually we flip past it on the way to the comics, the horoscope, of if you’re like me, to the sports section. But what do all those squiggles and arrows mean anyway, and now that you’re thinking about investing in mutual funds, can you see how your fund is doing every day in the morning paper?

The answer is, of course, yes. And not only that but mutual fund listing are a bit easier to read with less complicated jargon that reading the stock prices next to it. Most major daily newspapers have the mutual fund section separate form the rest of the stock and bond information. There is usually a large, bold headline showing where the fund are listed.

Now that you’ve found where the mutual funds are listed, let’s try to decode all this information. Your fund will be listed alphabetically in the column under the name of the company that manages it. You’ll see three column next to each fund name. In the first column, you’ll see “NAV”. This is short for “Net Asses Value.” Don’t panic, this is just a simple mathematical formula that shows what each share in that mutual fund is worth. To determine how much your shares in that mutual fund are worth, just multiply the amount of shares in that fund that you own by the NAV.

The second column says Offer Price. This is what you would pay right now if you wanted to buy more shares. Often, you’ll see a NL in this column instead of a price. I bet you can figure out what that means. Yep! It means it’s a no-load fund and you would pay what the NAV is if you wanted to buy more shares. Not so scary anymore, is it?

The final column is the change column. This information is the same essential thing that you would see if you were reading the stock page: a + in this column shows that the value of your fund has gone up since the last day’s close, and a – shows that it’s gone down.

And that’s it! While the mutual fund page in your newspaper may look bizarre, once you break it all down you can see that it’s all pretty basic. So start checking your funds today and you can watch your money grow!

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Types of mutual funds

So, you’ve decided to jump into the mutual fund investment game. While mutual funds have shown themselves over time to be a safer bet than regular stock trading, there is always the chance you could lose your shirt. But the type of fund you choose will have a lot to do with the amount of risk you take on and the kind of return you’re looking for. For starters, mutual funds are usually broken down into six main categories.

Equity mutual funds allow you to invest in typical shares of common, everyday stock.

Fixed income mutual funds allow you to invest in corporate or government securities that usually offer a set rate of return on your investment.

Balanced mutual funds allow the investor to take on a fund that includes both stock and bond options.

Maybe the safest form of mutual funds are known as money market mutual funds. They offer a high degree of stability for your principal, as well as high liquidity if you need to back out.

Bond mutual funds are popular since they invest in tax free as well as taxable ones.

And finally, sector/speciality funds are used to help diversify your holdings within a particular industry.

Each of these types of funds can be both aggressive and risky with a high level of reward possible, or they can be safer and lower risk. It all depends on which fund you choose.

To break things down further, equity funds are usually divided up into four different categories: Growth and Income mutual funds, International mutual funds, growth mutual funds and aggressive growth mutual funds. Each different type of fund has a particular goal in mind. For some, it’s to aggressively pursue income, even in risky situations, while others seek to preserve the initial investment and only take smaller chances.

As you can see, the mutual fund landscape is filled with so many options, it can make a newbie’s head spin. But fear not, there is almost limitless information available on which mutual fund is right for your particular investment strategy. Not only do most mutual funds and those that run them have their own website, there is endless advice as to which fund is right for you on the Internet, as well. Don’t forget to utilize publications like the Wall Street Journal, as well as friends and family who might have had particular luck with a specific fund. Welcome to mutual fund investing!

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Tips to invest for retirement

People choose mutual funds for investing for many different reasons. Some people start very early (the smart ones) with dreams of a second house in the German Alps or a thatched roof pub in the English countryside. For some, mutual funds are a practical and easy way to save for the college education of their kids, or even grandkids. But without a doubt, the most popular reason for mutual fund investing is saving for retirement. With social security looking less and less helpful, many realize that investing to save for retirement isn’t a choice anymore, but a must. Here are some tips for those that are looking ahead to their golden years with mutual fund investing.

First off, the earlier you start saving for retirement, the better. Convincing a 25 year old recent college graduate that they need to put some of their income away to save for college can be almost impossible, but trust us, the sooner you start, the better off you’ll be.

Take a financial inventory of your life. If you have several retirement accounts from jobs you’ve had since you were 30, you can easily combine them now into one savings account. You can also figure in the value of your home, your possessions and your savings to get an idea of how much net worth you have and how that can relate to your ability to save for retirement.

While this may sound like a basic idea, setting goals in a big part of saving for retirement. Get together with a financial expert and decide what age you want to retire at and how much money you’ll need per year and how long you expect to be retired for. Knowing all this will help you plan long term for your retirement.

Try to open an emergency account. This account, which should be all cash, can be for emergencies that you may face while you’re trying to save for your retirement. The main purpose is that in case something goes wrong, you won’t take the money you’ve been saving for your retirement out and use it. That money needs to be kept where it is so you can keep marching towards your retirement goals.

While saving for retirement can be difficult, using various investment tools including mutual funds can really help. Combine that with solid advice from your broker and you will be well on your way to celebrating your retirement years in style.

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Selecting a mutual fund

When you first get into investing, you have to have a clear idea of what it is you want to accomplish. Most people have long term financial goals like saving for retirement or saving for a second home or maybe to put the kids through college. You also have a time frame. You have 20 years to make this money, or if you get into investing at a younger age, you could have 40 or 50 years to spend investing before your goal comes due. These are all vitally important questions that you need to have answered before you start investing. They will tell you what sort of fund to select for your portfolio. Here are a few general tips for selecting a fund that’s right for you.

If your goal is to have the most growth to your capital that you can get, than an aggressive growth mutual fund or an international growth mutual fund is for you. These kind of mutual funds invest in stocks that are hot and have a great potential for hitting it big. The chance for your capital to increase is very high, but the risk involved in these stocks is also extremely high. They are only recommended for long-term investors who can afford to take a hit if need be.

If you’re looking for a high amount of capital growth, but you aren’t ready for that degree of risk, try growth mutual funds, specialty or sector mutual funds or international mutual funds. They tend to look more towards long-term success in common stock, not a quick hit. The risk is still considered high with these mutual funds, but it’s not as high as the previous option.

If your goals are a bit different and creating current income is a big part of what you want to do, than growth and income mutual funds are right for you. The risk level with these mutual funds are ranked high to moderate and they invest in common stocks with a good possibility for dividends and appreciation of your capital.

If your main goal is to create a high amount of current income and capital appreciation isn’t a concern, then fixed income mutual funds and equity income mutual funds would be the right choice. The risk is considered moderate to low, but the potential for current income is very high.

Selecting the right mutual fund for you is a very important decision. You must have a clear idea of your goals to make the right choice. Once you know your position, you can be well on your way to enjoying success in mutual fund investing.

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Tax and distributions

Most investors would agree that mutual funds are a great way to help create a nest egg, save for retirement or for your kids’ college education. There are, however, an entire series of taxes that are levied against investments of all kinds, including mutual fund investments. While they may not always seem fair, they are a fact of life and the more you know about all the various forms of taxes, the better prepared you’ll be to deal with them.

While there are fees associated with some mutual funds when you open the account, and taxes for capital gains as the money appreciates within the mutual fund, there are also a series of taxes associated with the distribution of earnings from the mutual fund back to you. These distributions can take on several different forms, such as capital gains, income dividends and interest. A mutual fund is legally obligated to give out all of the investors income and the money that the fund made. But what exactly is an income dividend?

Income dividends usually include dividends, capital gains and interest that is earned by the mutual fund company minus the expenses and fees are taken out. The distribution associated with capital gains is usually made once per year to the shareholders. These capital gains come from a year of good performance by the mutual fund. When a mutual fund company pays out dividends to their shareholders, the NAV or net asset value of your mutual fund will go down, but you can also take that dividend pay out and buy more shares if you’re happy with the performance.

There are ways to help avoid the tax liability of reinvesting your dividends back into your mutual fund. Most distributions done by mutual fund companies is done near the end of the year. If you don’t want to spend the payout on Christmas presents, you can reinvest the money, but you should do it after the record date. This will help you avoid extra tax liability on your dividends.

Paying taxes on your distribution is a pain. But if your mutual fund is performing well, a small tax on your earning won’t hurt so bad. This is another reason why intelligent, well managed investing is so important. Not only do you have to worry about your fund going up and down in price, but also tax liability. That’s why it pays to invest wisely and use a disciplined approach.

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