Active Investment Strategies

In recent times we have heard a lot about the growing trend in Mutual Funds and the need to invest in such funds for financial security, but most times we have only a vague idea of what this really means. Well it’s time to shed more light. What are mutual funds and why is it worthwhile for us to make investments in these funds? Let us shed some light on these questions.

A mutual fund is an investment solution that allows you invest in different asset classes like treasury bills, bonds, stocks and fixed deposits.

Normally, for an individual investor to be able to play at this high investment level, a lot of capital is needed as well as strong financial knowledge. Mutual funds make it easier & possible.

Now, there is so much financial jargon thrown around that you should understand a bit about, especially if you are a first time investor. So we decided to help educate you

1. Treasury Bills: These are short-term Federal Government backed debt instruments used by the Government to control money supply in the economy. As such, they can be considered as a short-term “loan” to the Federal Government. They are issued every week and these bills are usually for a 91-day tenor with options of a rollover.

2. Bonds: These on the other hand are long-term debt instruments usually with a maturity of 3 years. Generally, a bond is a promise to repay the principal along with interest on a specified date (maturity). The Federal Government, states, cities, corporations, and many other types of institutions sell bonds. Some bonds do not pay interest, but all bonds require a repayment of principal.

3. Stocks: This is when a share of a company/institution/organization is held by an individual or group. Companies raise capital by issuing stocks, and entitle the stock owners (shareholders) to partial ownership of the corporation. Stocks are bought and sold on what is called an Exchange, such as the Nigerian Stock Exchange or the New York Stock Exchange.

4. Fixed Deposits: This is a deposit held by a bank or any other financial institution for a fixed amount of time agreed upon by both parties (the bank and the investor). In exchange for not withdrawing the money during the agreed-upon period of time, the bank pays the depositor an amount of interest than is typically better that what would have been earned from a standard savings or current account deposit.

5. Diversification: This is the allocation of funds across a number of unrelated asset classes to minimize your exposure to risk. It’s a bit like not putting all your eggs in one basket.

6. Asset Classes: These are significantly different investments, and some examples include stocks, bonds, real estate, commodities, precious metals or collectibles.

7. Diversified Portfolio: This is one that is exposed only to specific market risks within certain asset classes and includes a variety of significantly different asset classes. This is almost likened to a portfolio that invests in asset classes that complement each other, are not alike and do not relate. An example is Real Estate, Oil & Gas and Mining.

Mutual funds allow investors to pool in their money for a diversified selection of securities, managed by a professional fund manager. It offers an array of innovative products like fund of funds, exchange-traded funds, Fixed Maturity Plans, Sectoral Funds and many more.

Whether the objective is financial gain or convenience, mutual funds offer many benefits to its investors. Mutual Funds help investors generate better inflation-adjusted returns, because while most people consider letting their savings ‘grow’ in a bank, they don’t consider that inflation may be nibbling away its value.

Probably the biggest advantage for any investor is the low cost of investment that mutual funds offer, as compared to investing directly in capital markets. Most stock options require significant capital, which may not be possible for young investors who are just starting out. Mutual funds, on the other hand, are relatively less expensive.

401K and IRA Best Investment Strategy for 2014 and 2015

If you invest money in a retirement plan on a regular basis the best investment strategy for 2014 and 2015 is an investment strategy that will keep your investment portfolio on track without subjecting you to a lot of risk. Most of the investment options in a typical 401k and many IRA plans are mutual funds. To achieve long-term growth with only moderate risk you need to invest money in both stock funds and bond funds. What’s your best strategy for 2014 and beyond?

After 30 good years bond funds will turn sour when interests rates turn around and go up (that’s the way bond funds work). Stock funds have returned well over 100% since early 2009. Interest rates are near all-time lows, and an abrupt reversal in rates could cause havoc in both fund categories, resulting in big losses for investors in 401k and IRA plans. It’s time to get proactive to protect your retirement assets.

The best investment strategy for average long-term investors traditionally focuses on a mix of stock funds and bond funds. Picking the best stock funds and best bond funds to invest money in from your list of options is a secondary consideration. Concentrate instead on asset allocation and investment strategy. In other words, how do you spread your money across the different options offered and what kind of strategy do you use to make sure you stay in a position that fits your risk profile? We’re talking money management here, and we’re talking about your financial future.

Let’s say that you consider yourself a middle-of-the-road investor. You are willing to accept moderate risk in pursuit of higher than average returns. Wall Street has traditionally suggested that the best investment strategy is to invest money with about 60% in stock funds and 40% in bond funds. To protect yourself against the possibility of heavy losses in the future, why not get more conservative with your asset allocation?

In a 401k plan asset allocation is your responsibility and you must make decisions on two levels. First, for the investment assets you already have in place (your portfolio allocation). Second, for the new money you invest each payday (your contribution allocation). These allocations can both be the same, or they can be different. For example, upon review of your statement you might see that 70% of your portfolio assets are in stock funds, with 30% in bond funds. And you have 50% of your new contributions going to each.

Here’s my suggestion for the best investment strategy for cutting your risk while keeping stock and bond funds an integral part of your investment mix. No matter what your portfolio allocation is now, change it so that you have equal amounts invested in these three areas: stock fund(s), bond fund(s), and a safe investment option. If your 401k offers a STABLE ACCOUNT option that pays a decent interest rate, use it as your safe option. If it doesn’t, go with the money market fund. Remember, interest rates are extremely low, so money market funds presently pay very little interest. On the other hand, some 401k stable accounts pay higher interest rates than you’ll find anywhere else.

For your allocation for new contributions set it up the same way with one-third going into each of the three options. If you have an IRA that you intend to contribute to on a regular basis, have it set up so that money automatically flows from your bank account to your IRA account. Split the existing money in your IRA into the same three areas as above, and set it up so that equal amounts flow into a money market fund, stock fund, and bond fund each month.

The above strategy will not be the best investment strategy vs. the traditional 60%-40% strategy if both stocks and bonds continue their winning ways in 2014 and beyond. You have traded higher growth potential for greater safety. If, on the other hand, interest rates rise significantly and throw a wrench into the stock and bond markets, this investment strategy should work to your advantage.

Let’s say that stock funds and/or bond funds decline significantly in value for a couple of years or more before rebounding. My suggested strategy has two primary advantages. First, your losses will be lower. Second, the new money you have flowing into stock funds and bond funds each month or each payday will buy more and more fund shares as fund prices get cheaper. When prices rebound you will break even and start to show a profit sooner because you bought stock funds and bond funds at cheap levels. That’s called dollar cost averaging… which is a crucial part of the best investment strategy.

Sometimes the best investment strategy is to take aggressive action – like after a major decline in stock prices. Other times the best strategy is to be more cautious by cutting the risk in your portfolio… while you continue to invest money in stock funds and bond funds. In 2014 and beyond, I believe that caution is your best strategy.

A retired financial planner, author James Leitz has an MBA (finance) and 40 years of investing experience. His complete investing guide for beginners, Invest Informed, teaches how to invest starting with investment basics.

Buying Cartier Jewelry-the Best Way To Invest Your Money

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Investing in the cartier jewelry, you will find it that it is a potential thing to get the profit. So you are consider to make an investment and don’t know what to invest. Then choose the cartier jewelry, it will give you the big surprise.