Mutual Fund 2

Ways to buy
1. Through a broker
2. Directly from the fund
3. From a bank
4. Through other sources:financial planners, insurance agents, or other professionals who are licensed to sell securities.

Fill out an application: to open your account with a mutual fund

Exchaging shares:
Most funds that allow exchanges, however, set limits on the number of times you can exchange shares without incurring any charges. Be aware that although there may not be a fee to exchange shares, there may be tax consequences associated with the exchange. Check your fund's prospectus for details or call customer service.

Ways to sell:
Simply call the fund's 800 number or your broker and give them your instructions.

Helpful tips:
1. check as many options as the fund allows.
2. do not box yourself in by choosing options that won't allow you to access your money when you need it
3. Keep the prospectus you receive from a fund for reference in case you have any questions later.

uesful site:
http://www.lipperweb.com/
http://www.ici.org/

The Fund Calculates The Value
(Total Assets-Expenses)/Number of Outstanding Shares=Net Asset Value (NAV)

The way to invest:
Voluntary accumulation plans: allow investors to buy small quantities of mutual fund shares on regular basis. You open an account with a minimum investment of cash or mutual fund shares and make additional deposits on a regular basis, usually monthly or quarterly. A commercial back usually administers the plan.

A specific amount each month: called dollar cost averaging. You invest the same amount each month no matter what the NAV.
This method is most appropriate for people who want a structured, disciplined investment plan and do not want to worry about trying to time the market for the best prices.

Taxs and consequences:
What is Taxable:
you will only be taxed on money that is distributed to you by the fund:
1. Capital gains
2. Dividends

You will also be taxed on any gains from the sale of your shares:
1. At least 95% of the money a fund earns must be distributed to investors in the year it is received
2. Each purchase and sale of fund shares is a separate transaction for tax purposes

Long-term versus short-term:
The government rewards you for holding your shares longer by taxing longterm capital gains at a lower rate.

Be aware of this:
Investor in tax-sheltered accounts
Investor in non-tax-sheltered accounts
The important date here is the declaration date of the distribution.

Save your statements from all of your mutual fund investments. you will need them for calculating your taxes.

know when not to buy a fund
If you are buying and selling mutual fund shared in a tax -deferred or tax-free account, you d onot have to worry about when you buy shares.

A large distribution: Buying fund shares after it makes a distribution will lower the amount you pay share. More of your money will be working for you.

Know when to sell a fund
Starting over: if the manager of the fund decides to sell the fund's entire portfolio and start fresh, you may end up with a significant tax liability from capital gains.

Sell after the first of the year: if you wait to sell a fund until after the first of the year you won't have to pay taxes on any gains untl the following year.

Avoiding Unwanted Tax Liabilities:
1. Buy your shares through a tax-deferred or tax-free accout: it  is designed to help you pay taxes when you may be in at a lower tax bracket.

2. Examine the fund's holding: Check the financial highlights table(net distributions) to see if the fund has a history of large capital gains distributions. If so, you might consider waiting until the fund sells those holding so you won't be paying taxes on gains you did not realize

3. Know when distributions will be made: Wait until after the distribution to buy shares.

4. Consult with the fund manager: find out what the fund plans on doing with capital gains and dividend distributions.

Evaluating A Mutual Fund
The Prospectus: Mutual funds are required by law to provide prospectuses
All funds must produce a prospectus: it covers all the relevant information about the company, such as its history, operation, financial conditions, and key personnel. it tells you the fund's objective, potential risks, fees, costs, fund policies, how to buy and sell shares, and other information.

Prospectus is called the summary. It highlight the main objective of the fund, its primary risks, and the overall strategy for achieving the objective.

SAI: Statement of additional information

Risk you Mutual fund:
1 You could lose all your money

2 Inflation

3 Concentration

4 Credit risk: this is the possibility a bond issuer may not be able to make scheduled interest and principal payments

5 Liquidity: If a fund has difficulty liquidating its investments, its returns could be lowered

6 Interest rate:

What is performance:
What the fund must tell you: Each funds is required to tell you the percentage the value of its assets has increased in the past. Fund refer to this information as performance or annual total return. The information must include:
1. A bar chart
2. The actual performance number
3. The years covered
4. Any notes or other key information

What affects performance:
Just as anything can affect the price of a stock: the stock markets, the economy, social changes or general investment attitudes

A way to compare:
All funds are required to compare their performance to benchmarks. Benchmarks are indexs that are used by the industry and are considered to be good measure of how a pwrticular segment of the market performed during a specific period of time

If you think a funds performance is significantly highter or lower than the benchmarks and the reason is not readily apparent, be sure to read all the footnotes acoompanying the performance information. If there is no reasonable explanation for the difference the fund is either doing a better job of investung its assets, or the manager amy not know what he is doing.

what is Average annual return: Average annual returnis an average of a specific number of years of the fund's performance.

Why it is impotant: Mutural funds will advertise either their average annual returns or their latest total return for a specific period---whichever will look better for them