Markets may have rebounded in 2009, but individual investors are still edgy and shell-shocked.

Even as the broad Standard & Poor’s 500-stock index remained up 56% since March, the U.S. unemployment rate crept above 10%, according to a Labor Dept. report released Nov. 6. “I don’t think many people are feeling very relieved,” says Milo Benningfield of Benningfield Financial Advisors in San Francisco. Many people believe the “[stock market rally] can’t last,” he says.

These remain risky times, and the last few years have demonstrated to investors the high cost of doing the wrong thing. Against that nervous backdrop, BusinessWeek asked financial advisers what common mistakes investors are making, and how to avoid them:

1. Don’t Jump In All at Once
A little optimism can be a dangerous thing. Individual investors are notorious for selling stocks when markets have already dropped and buying after they have risen. And, says Susan Elser of Elser Financial Planning in Indianapolis, “Selling low and buying high is the worst thing you can do for your returns.”

Among those who stayed away from stocks and other risky investments for the past year, many are irked to have missed out on the recent rally. But is now the right time to buy again?

Don’t rush back into the market because you worry you’ve missed the rally. “The biggest mistake is [to try] to make everything up at once,” says Micah Porter, president of the Minerva Planning Group in Atlanta.

At these levels, a 10%, 15%, or 20% correction in the stock market is entirely possible at almost any time. So, instead of buying all at once, Porter advises buying stocks gradually over the next year—or, if you have a lot to invest, an even longer time frame. That puts you in the market long-term, but minimizes the chances you’ll buy at the market’s exact peak.

2. Don’t Fall for Fads or Hype
In investing, jumping on the bandwagon is often a bad idea.

For example, television ads have appeared touting gold as an investment after the precious metal’s price has jumped higher, approaching $1,100 per ounce on Nov. 6.

Yet this could be the very time when gold prices are at or near their peak. “This is probably the worst time in my opinion to pile into gold,” Benningfield says. He also warns against currency speculation, another recent fad. “It’s really risky,” he says.

Along with other commodities, gold can be a valuable part of investment portfolios. But advisers like Steve Medland of TABR Capital Management in Orange, Calif., suggest keeping gold to less than 5% of your holdings.

Lots of marketing dollars are also pushing equity-indexed annuities these days. “It is the hot product of the day,” Elser says. But Elser, Medland, and others warn about the complexity and high fees of these annuities.

3. Don’t Use Headlines or Politics as Investing Guides
“Making [an investing] decision based on who is in political office, whether you agree or disagree, is a huge mistake,” says Elaine Scoggins, client experience director at Merriman, a Seattle-based investment advisory firm.

Since the election of Barack Obama as President, political temperatures on the right have risen (just as tempers rose among liberals during the last Administration). And that could be leading to bad investing decisions.

Based on their political beliefs, people are buying into disaster scenarios, from high inflation to a crash for the U.S. dollar to skyrocketing tax rates, Scoggins says. “There are a lot of scare tactics in the media and in politics.”

Betting your portfolio on these unlikely outcomes can be a big mistake.

“There’s incredible fear out there,” says Paul Sutherland, chief investment officer at FIM Group in Traverse City, Mich. But not all the fear is warranted. For example, he notes, a weaker dollar actually can help U.S. manufacturing or U.S. firms with overseas profits.

Politics and current events tend to spark emotions, which are a poor guide for long-term investing, Medland says. “What’s going on in the headlines doesn’t predict what is happening in the markets,” he says.

However, one political fact investors should be aware of is the likelihood of higher taxes for wealthier Americans. Though it’s hard to know when and how much rates will increase, good financial advice can help taxpayers minimize their tax bills in some cases. For example, Americans might take investment gains now, while capital gains rates are still relatively low.

4. Don’t Disregard Quality
Since March, the lowest-quality companies have had the best-performing stocks. Punished in the depths of the financial crisis, they have rebounded on hopes of a recovery. For example, banks, industrial firms, or very small companies—i.e., risky firms highly influenced by the financial crisis and the recession—have seen their shares double or triple in price.

Meanwhile, companies with stable, consistent businesses have often languished in the stock market.

Don’t expect that trend to continue. In fact, the trend may have already ended.

Consider the firms that have done best over the last 12 months in boosting revenue. According to Capital IQ, the top 100 revenue-raisers in the S&P 500 are up a median of 50.3% since the March low, while the firms with the 100 worst 12-month sales-growth records have rocketed higher by a median of 96.7%.

In the last month, though, the performance between the two groups began evening out, and in the past week the trend has reversed entirely. In the first week of November, the median quality firm is up 0.6%, while the median worst firm is actually down 0.2%.

John Merrill, chief investment officer at Tanglewood Wealth Management, says the shift may be the result of a new kind of investor entering the market. These stock managers have been cautious for months, but now they believe they need to start buying. Still wary of risk, “They’re going to take the safest step into the market,” Merrill says.

Firms with strong fundamentals also can be more resilient long-term bets and may be selling at cheaper prices after the recent rally, Sutherland says. “There are a lot of quality companies selling at great prices,” he says.

The same may be true in the bond market. Porter warns against buying high-yielding junk bonds after an “incredible run” for the risky investments.

5. Don’t Forget What You Learned
The sudden drop in stocks in 2008 and early 2009 taught every investor what can go wrong. Financial experts say these lessons shouldn’t be forgotten, even amid a stock market rally.

“People should always be thinking about those worst-case scenarios,” says Medland. The biggest mistake in a crisis, he says, is to not have a plan in advance.

The crisis also taught investors something about themselves, about their ability to invest for the long-term without selling low and buying high.

If you panicked in March and sold all your stock, you’ve lost out on big gains. If you’re susceptible to such investing mistakes in times of crisis, maybe you should pursue a more conservative strategy, Elser says.

“People who jump in and out of the market probably shouldn’t be in the market,” Elser says. “You either have that tolerance for volatility or you don’t.”

For many investors, “one lesson is maybe they took on too much risk,” Benningfield says.

Against the backdrop of a tough job market, investors are desperate for returns from their investments. They’re still smarting from huge holes in their portfolio caused by the market meltdown. But it’s important to remember: If you lost big on risky investments in 2008 and early 2009, the solution is not to take on even more risk in an attempt to win back your losses.

Source:businessweek.com

Mutual funds are making a strong penetration among common people. The reason is very clear. Every individual keeps interest to make money. But, due to lack of proper knowledge they hesitate to enter into the stock markets. So, mutual funds give a good platform for common investors.

Investments in any financial instrument requires some expertise. But, if we will talk about stocks, bonds and some special financial instruments then it requires more expertise and constant supervision to enable an investor to take informed decisions.

In general, Small investors usually do not have the necessary expertise and the time to undertake any study that can facilitate informed decisions while investments. This is the predominant reason for the popularity of mutual funds. Apart from it, there are many other benefits that can be taken by investing in mutual funds.

Investors can diversify their investments by investing in mutual funds. Small investors may not have the amount of capital that would allow optimal diversification. Since the corpus of a mutual fund is substantially big as compared to individual investments, optimal diversification becomes possible. As the individual investors’ capital gets pooled into a mutual fund, all of them are able to derive the benefits of diversification.

Apart from it, investors can save transaction cost by investing in mutual funds. Transactions of a mutual fund are generally very large. These large volumes attract lower brokerage commissions and other costs, as compared to the smaller volumes of the transactions entered into by individual investors. The brokers quote a lower rate of commission to fund houses. So, investors can get benefit.

Other benefits are also with mutual-funds. Mutual funds generally offer a number of schemes to suit the requirements of the investors. Thus the investors can choose between regular income schemes and growth schemes, between schemes that invest in the money market and those that invest in the stock market, etc. Some schemes provide some added advantages also.

The most important thing is mutual-funds are managed by professionals. Mutual funds are generally managed by knowledgeable, experienced professionals whose time is solely devoted to tracking and updating the portfolio. Thus, investment in a mutual fund not only saves time and efforts for the investor, it is also likely to produce better results.

Liquidating a portfolio is not always easy. There may not be a liquid market for all the securities held. In case only a part of the portfolio is required to be liquidated, it may not be possible to sell all the securities forming part of the portfolio in the same proportion as they are represented in the portfolio. These problems can be solved by investing in a mutual fund. A mutual fund generally stands ready to buy and sell its units on a regular basis. Thus, it is easier to liquidate holdings in a mutual fund as compared to direct investment in securities.

Now days, fund houses are providing many option for investors. According to requirements, investors can choose the best option.

Source:ezinearticles.com

With so much uncertainty in today’s economy, it’s especially important to diversify your portfolio to reduce your risk and what better way than to invest in good mutual funds. While you shouldn’t expect instant riches overnight, even investing little amounts of money can go a long way towards your future.

If you do not want to concern yourself with the management of your portfolio, then investing in mutual funds is a great way to doing so as a majority of these are professionally managed. Depending on your risk level, there are many different categories of funds that invest in specific holdings.

For example, there are good mutual funds available where you can have shares into only energy or utility stocks. Likewise, there are also funds that invest in only specific assets ranging from governmental bonds to start up companies. With so many choices available, how do you know which one to invest in?

The biggest responsibility that you will have that prevents a lot of people from investing is doing research. The best place to start is by reading the Wall Street Journal and Business Week as these always include articles into the best performing and recommended mutual funds at the time.

From there, it simply becomes a matter of doing more research into the company including the board of advisors and how well the company has done in the past. Use resources such as Morningstar to get a better picture of how likely a particular fund will perform in the future.

Another valuable resource is to make use of the Lipper Leader Fund Ratings which use total return, tax efficiency, expense, preservation and consistent return as criteria for rankings. The information in these resources should never be taken at face value but they should be instead used as a guide.

Source:ezinearticles.com

With many companies struggling to stay afloat in this economy it’s understandable that people are hesitant to invest in assets such as stocks or real estate. With so much financial uncertainty, it makes even more sense today to diversify investments to reduce risk. Given the nature of mutual funds, they are perfect candidates for investments as they allow diversification and professional management.

The benefits include being able to have holdings into multiple companies as your funds will be allocated towards different assets which can range from aggressive to passive. There are literally hundreds of different categories available so you are bound to find one that interests you. In addition, most funds are professionally managed by a board of advisors who will make investment choices for you.

This can be extremely beneficial for those who may not have the expertise to manage their own portfolio but would still like to get started. Of course, the trick is actually finding those funds that will pay off in the long run. There are certain industries that are known to be stable such as utility and oil companies so these types of mutual funds would be a great place to get started.

One thing to keep in mind is that many mutual funds are dependent upon the economy and when things slow down, the fund’s value can also decrease as well. If the fund you invest in charges a high management fee, then you can expect even lower returns on your investment. Be sure to review all the fee structures and to choose a no-loan fund if possible.

Understanding the different types of funds is crucial to be a successful investor as it is simply another vehicle to securing a financial future. Despite the current economic situation, mutual funds are still an excellent investment as they allow for diversification and professional management.

Source:ezinearticles.com

Everyone knows that the first quarter of 2009 turned out to be the scariest time for a stock investor. Most of people lose their money in the stock market. And now, they are afraid to invest more money in the stock market. But investing is no longer optional for Americans.

Today, everyone must invest. You must invest if you are to reach for your dreams, if you are to have the life you want. You must invest in case you lose your job or become divorced or widowed or want to educate your children. And, of course, you must invest to have the money to do the things you want to do in retirement. Successful investing requires a plan and a strategy

If you are just starting out
Discipline with your plan is the key factor. Set up a plan to invest a certain amount of money each month. Take it from your paycheck if you can. You can do it with a tax-deferred plan like a 403 (b) plan. It works particularly well for young people because the money is deducted from your paycheck before you ever see it. This is a great time to get started as an investor because the market has gone through such an extensive housecleaning. Time is on your side, and time is an important measure of wealth.

If you feel difficult to find individual stocks, you can invest in mutual fund or an index fund that represents the entire market. Diversification is the key to be successful in stock market and mutual fund can do that for you. That way you spread your risk among many stocks and your investment will do as well – or as poorly – as the overall market.

If you are at mid-career
If you are at mid-career and you experienced loss in the recent stock market crash, don’t be afraid. You still have time to make up for the losses you may have experienced in the market crash. If you already have a portfolio of investments in your 403 (b) plan or in a taxable account, don’t be quick to sell them off.

If you feel afraid to invest in single stocks, then my suggestion is to put new money into a mutual fund or one of the exchange-traded funds (ETFs). Like a mutual fund, ETFs contain a basket of stocks sliced up into individual shares. Most of them follow indexes that allow you to pick a market segment, such as developed countries outside the U.S. or emerging markets or the U.S. stock market. But unlike mutual funds, they trade on a stock exchange so they can be bought and sold all day

For you who are at mid-career, don’t forget to keep near-term money liquid in money market funds. This is important in case of the market plunge again.

If you are nearing retirement
For you who are nearing retirement or already retired, don’t invest too aggressively to try to make up for recent losses. Don’t do it. Don’t act on impulse to change your portfolio.

If you decide to never go near the stock market again, that is a mistake. You need stocks in your portfolio to keep up with inflation. Again, I recommend a broad-based index mutual fund or ETF that will go up and down with the overall market.

Revy Azhary’s useful investing stock info. Providing essential information about stock investing, investing online, and real estate.

Source:ezinearticles.com

You want to get started as a mutual fund investor. What funds should you invest in? You have thousands of different mutual funds to choose from. I suggest you first open an account with a major no-load mutual fund company like Vanguard, Fidelity or T. Rowe Price. Then pick these two funds to invest in, investing an equal amount in each.

Remember, you are just getting your feet wet and don’t want to start with a bad experience. So, here are what I suggest are your best mutual funds to get started with. Your overall risk will be low to moderate.

Your first pick is a no-brainer, a money market fund. These are the safest of all mutual funds and their value or price does not fluctuate. In this investment you simply earn interest in the form of dividends. The amount of interest you earn varies, based on interest rates in the economy.

There should be zero cost to invest in a money market fund, no commissions or sales charges called LOADS. Once you have money invested here, you can move it at will to other funds offered by the fund company (also called a fund family).

Keeping things simple, your other best “starter fund” is called a BALANCED FUND. These funds invest in both stocks and bonds, so risk is generally moderate. These days there are several variations of balanced funds, giving the investor plenty of latitude. There are traditional balanced funds, asset allocation funds, lifecycle funds and target retirement funds.

All balanced funds have a diversified portfolio of stocks and bonds, but they vary in terms of safety, dividends, and growth potential. Basically you can place them into three different risk categories: conservative, moderate, or aggressive. I suggest you go with a balanced fund labeled as moderate in the fund literature you get from the fund company.

Traditional balanced funds have been around for many years and have a moderate asset allocation of about 60% stocks and 40% bonds. This ratio of stocks to bonds remains fairly constant. These traditional funds are generally simply called “balanced funds”, and are a good solid place to invest for the new investor.

If you want to get more conservative or aggressive, I suggest lifecycle funds. For example, an aggressive-growth lifecycle fund would be the riskiest and would be heavily invested in stocks vs. bonds. Dividends would be low to insignificant. On the other hand, a conservative lifecycle fund emphasizes bonds vs. stocks, and hence is safer and pays higher dividends.

For most new investors I suggest a traditional balanced fund, or a lifecycle fund labeled as either moderate-growth or conservative-growth.

With half of your money in a money market fund and half in a balanced fund you won’t get rich quick, but you won’t lose your shirt when things get ugly in the economy either.

Once you learn how to invest and gain in confidence, you can expand your horizons. All three of the fund families mentioned offer a wide array of investment choices. Plus, all three offer funds with no commissions, no sales charges … NO-LOAD. Learn how to invest at your own pace. Until you feel up to speed, just relax and stick with your starter funds.

Source:Ezinearticles.com

A bad economy spells OPPORTUNITY if you know how to invest in mutual funds. If you don’t it likely means loss of income and investment losses in your 401k and anyplace else you have money invested.

In any investment environment, even in recession and financial crisis, there are mutual funds that are good investments. Most folks don’t know this. Most mutual fund investors hold stock funds and pay little attention to them. Then, when bad economic times roll around, they complain because they are losing money.

Stock funds in general are losers in a recession, because the stock market takes a dive. If you know how to invest, you don’t rely on the stock market delivering good returns year in and year out. You invest in a variety of investments. The easiest way to do this is with mutual funds.

Specialty stock funds are non-diversified. They do not invest in a wide variety of stocks like the ever-popular diversified stock funds do. If you have money invested in the right ones at the right time, you can make money when other less-informed folks are losing theirs.

Let’s look at funds that can be winners when stocks and/or bonds in general are losers. You may be surprised to learn that you have so many investment options by simply investing in mutual funds. Welcome to the small investor’s world of alternative investments.

In times of high and/or rising inflation stocks and bonds in general are vulnerable to big losses. But not all stocks. Oil stocks and the basic materials sector (aluminum, copper, other natural resources) can soar. NATURAL RESOURCES funds go along for the ride.

In times of great uncertainty and political unrest gold and other precious metals can explode in price. Gold stocks and GOLD FUNDS are the easiest way to jump on this bandwagon.

Foreign investments can sometimes be unaffected by domestic problems in the USA. Stock funds are available that invest in emerging markets like China, Mexico, and India. Others invest in well-established markets like Europe and Japan.

Real estate, at times, has prospered when the stock market in general was in the doldrums. Specialty stock funds that invest in the real estate sector are offered by some of the major mutual fund companies.

When interest rates soar, bonds and bond funds take a beating and most stocks and stock funds as well. Where’s the best place to ride out the storm? MONEY MARKET FUNDS are safe and do not fluctuate in value. As interest rates go up they pay higher interest in the form of dividends.

As a mutual fund investor you should be a long-term investor, not a speculator. In other word, you don’t ever sell all of your stock funds and bond funds and move your money to gold funds, or natural resources, or real estate. Instead you should maintain a balanced position that includes all of the above.

Then, as circumstances dictate, you make adjustments in your asset allocation. Once you learn how to invest, you can avoid heavy losses in a bad economy. Once you’re really up to speed you can make the best of a bad situation and prosper even in the worst of times.

A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.

Source:Ezinearticles.com

If you’re working with a top mutual fund company, they will know how to use your money to increase your profit margin as well as their own. They are able to make the most of every investment, which is exactly what you’re after. It never hurts if you know a little something about this type of funds, too, so that you can understand when you’re investing in the right fund. Investing in the wrong fund will only waste your investment capital, and you won’t see the return you should be seeing. Make sure you know exactly what you want from a fund before investing.

Mutual funds have become an industry favorite, because it doesn’t take a great deal of money to get started. A novice investor should spend some time educating himself about current market trends, though. When you purchase mutual funds, you’re buying shares in a company. As longtime investors say, your aim is to maximize your returns while minimizing your risks. Mutual funds certainly offer you the best option as far as being flexible, and they are very fast and easy to sell when that time comes.

In a poll taken by the media, consumers overwhelmingly voted for mutual funds as the best investment, mostly because there is so little risk involved. In recent years, investments in these funds have surpassed national saving certificates and the public provident fund as the best way to save money. Investors also find that they can save on taxes by investing in them.

If you’re new to investing, you will find a great deal of information on the internet that will teach you the best ways to buy and sell funds so that you can save money on your investments and earn maximum profit.

For short-term investments, you can’t beat a higher risk fund. You can find funds which have won performance awards, but check them out thoroughly to make sure they fit into your investment plans before investing. As mentioned earlier, you can find a ton of helpful information regarding mutual funds just by researching on the internet.

If you’re looking to save tax dollars by investing in mutual funds, you’ll want to manage your funds carefully and keep track of what’s going on in the market. If you don’t know which funds are the best investments for you, you can always go to a broker for assistance.

It’s getting harder to make ends meet in the world today, but you can make it easier by investing in the right funds. By having a cushion in the low-risk mutual fund market, you’ll be able to weather the blows life throws at you with a great deal less stress.

If you’re worried about your retirement years or paying for your child’s education, you’ll find help in mutual funds. In fact, you can make enough by investing in these funds to make your whole life much easier to live. With mutual funds, instead of you having to work for the money, it works for you.

Source:Ezinearticles.com

Engage is an established financial services company with over twenty – six years in the financial services industry. In 2005, Engage Mutual Assurance was launched as a trading subsidiary of Homeowners Friendly Society Limited.

They are the leading provider in the United Kingdom of tax-exempt savings plans, child trust funds and over fifties life insurance. Engage Mutual Funds Limited is dedicated to the provision of value for money products that are simple and easily accessible. Products are designed to enhance the welfare of people.

Engage partners with Park Row Associates and SimplyBiz in the Independent Financial Advisor market and delivers an excellent level if support to meet their needs.

Engage received the Investor in People award in 2001 and have kept up this standard ever since and in 2006 their employees received a gold award for charitable contributions through their “give as you earn” scheme.

The Engage child savings and investment solutions include two schemes, the “Engage Child Trust Fund” and the “Junior Easy Save”. Both of these are affordable investment and savings options.

The Engage Child Trust Fund allows your child’s savings to benefit from the latent growth of stock market based investments; this is a Stakeholder account. Features of this account include:

• No hidden charges, just one simple, annual management fee of 1.5% guaranteed for the lifetime of the account.
• Acceptance of deposits from as low as £5 and various savings methods. Child trust funds are generally set at a minimum of £10.
• The potential for Stock Market growth, engage Child Trust Fund invests in a variety of shares with different companies, this spread of investment provides reduced risk as well as taking advantage of the potential growth of stock market investments.
• The option for “lifestyling” which means if you select this option, the money will be moved gradually, at age 13 of the child, from medium to high then low risk and back again, until the child reaches the age of 17 years when the money is switched over completely.

Every child who is a UK resident and was born on or after 1 September 2002, and for whom a child benefit is being claimed, is entitled to receive from the Government a £250 Child Trust Fund voucher, this increases to £500 for lower income families. On the 7th birthday of the child another payment is made into the Child Trust Fund, again £250 or £500 dependent upon the income of the family.

Engage is the UK’s leading Child Trust Fund providers and they are committed to help you with any and all the information required to set up a Child Thrust Fund. They invest in stocks and shares in a range of companies listed with the FTSE 100, with the aim of achieving long term capital growth, whilst spreading the risk.

Once a contribution has been made into the Child Trust Fund, it is owned by the child and stays in the same account until the child reaches age eighteen, thereafter the funds belong to that child.

Source:Ezinearticles.com

Craig and Jenny were a young New Zealand couple trying to make their way in life. They were renting their home, and they were saving for a first home deposit. They wanted to be able to own the home they lived in. To do that they would need to borrow around $300,000 for the purchase price.

They discovered that a $300,000 loan would cost them around $500 per week to service. That means that payments of around $500 would be made to the bank which would cover the cost of the loan and some repayment of the loan. This did not excite them at all.

They thought this was too expensive for them and they wisely decided that they were going to keep saving for their home deposit for the next three years.

They made this decision because the rent on this home that they wanted to own, which they were already renting was within their modest incomes. It was also a modern design and was warm, with good neighbors too.

One day Craig and Jenny read an interesting statement. It was one that really made them sit up and take note. It really caught their attention…

They read, “If today I asked you to save $170 per month for your retirement, you’d say, “No we can’t afford it”. So what if someone invited you to save for your house for the next three years, and the Government paid you (as a couple) $170 per month for your retirement as well?”

What the article was driving at was that the New Zealand Government will pay about $86 each per month to them as a couple while they saved for their home using KiwiSaver. Do you think that Craig and Jenny liked that?

How many people know that they loved it? I’m guessing you would too. The New Zealand Government also thinks so. That is why the government added the home ownership aspect to the KiwiSaver scheme.

Every New Zealand resident that has never owned a home can take advantage of this plan with KiwiSaver. To qualify, you need to be resident and contributing to KiwiSaver for the savings time frame of at least 3 years.

You also need to be willing to wait out the three full years before you buy any home. After this time frame has passed your own contributions and those of your employer can be drawn out for your first owner occupied home deposit.

Craig and Jenny, like many young New Zealand couples will both pull out their money from the KiwiSaver scheme and both move into their jointly owned first home. This will be their owner occupied residential home. That is stating the obvious, but it is an important fact to note.

This articles is supplied as an information service. While every care has been taken to supply accurate information at the time of writing the article, errors and omissions may occur.

Accordingly Life Risk Limited accepts no responsibility for any loss caused as a a result of any person relying on the information supplied. Please seek out individual, specific advice.

A disclosure statement is available, upon request and free of charge.

Source:Ezinearticles.com