Planning for the Future
More Investment Options

You have already read the Basic Financial Planning article in the Spring Issue and as promised this is an introduction to more investment options for you to consider, research thoroughly and discuss with your financial advisor.

Mutual Funds

Mutual funds provide the average investor with the services of a professional money manager for a small annual fee. With the goal of achieving the best possible return, the mutual fund manager works with a team of researchers to make the best buy and sell decisions and to manage risk. Mutual funds contain a variety of stocks, bonds and other securities, so that if one particular stock, for example, drops in value it does not affect your portfolio to the degree that it would if you owned only that one stock. There are many categories of mutual funds including sector funds, which buy shares of corporations in a particular sector such as technology, science or health. There are also growth funds, index funds and several types of bond funds. Mutual funds pool money from thousands of investors, allowing you to invest small amounts of money in specific sectors of the market. You can research mutual funds through all major brokerages and at www.morningstar.com, an independent fund rating agency.

Stocks

You can also purchase the stocks of individual corporations. Do your homework before purchasing stocks. Learn what factors should be considered before purchasing stocks. At a minimum, consider past performance, if the stock pays a dividend and the price to earnings ratio of the stock. Know what you are investing in. You should understand what the corporation does, how it makes money, strategic plan for future operation, even the future of the industry or industries which might affect the success of the corporation.

Bonds and Bond Funds

The term bonds can refer to government issued securities, like U.S. Treasury bonds, but this category can also include municipal bonds and even bond funds. These types of investments are typically more conservative and earn lower returns than stocks and mutual funds.

A well-balanced portfolio should contain include mutual funds, stocks, and bonds. As suggested in the magazine article, where you invest your money will depend on when you need access to it. Brokerage firms offer a wide range of portfolio planning tools, including information about the past performance of various investment options. The most important consideration is that you completely understand what you are investing your money in. Use several sources including reputable internet sources, very experienced professional advisors and reputable authors.

Five basic questions you should be able to answer before you invest:

Are the mutual funds managed by a professional money manager?

How long the manager has been managing mutual funds.

Find out the index for the sector you are considering investing in and see how the manager has done against it.

What is the fee structure? Compare it to the average fee structure which you can find on Morningstar.

When will you be required to pay taxes.