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mutual fund

mutual fund questions and answers

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Q: Mutual Fund?
(Q1) Everybody talks about investing money in Mutual Fund. suppose, you want to invest some money in Mutual Fund (CLOSE ENDED for 3 years say) (say in HDFC Tax saving Mutual Fund). How you will be paid your return after 3 years ? does the Mutual Fund company AUTOMATICALLY sends your profit(if any) by cheque to your home address ? who pays the return(profit) ? i am confused, how one will get the return(profit) ? (Q2) Now suppose, suppose, you want to invest some money in Mutual Fund (OPEN ENDED i.e you can withdraw money at any time...right ?) . now, say you want to discontinue after 3 Months. what you have to do ? i have read ...you have to "sell the Mutual Fund" ....but selling to whom ? how do i get the customer to sell? is it necessary to sell ? if i dont sell but want to withdraw what will happen ? very much confused. ------------------------------------------- can you please clarify my some more doubts ? which is better mode of investment ? (1)with dividend or without dividend ? (2)close ended or open ended ? -------------------------------------- i have also read a fact , that suppose you invested some mone to a MF fund company. but the MF company ruined and could not survive....thats means, you are not getting any profit...right ? your money is gone....correct ? well ok....but the most stunning fact and dangerous thing i have read is that you have to sell your furnitures,TVs,Computers and other household things to pay off the MF company . because , they say,...you too have the liability as the company ruins so you also ruin. is this fact true ?

A: You have received an answer about open ended funds. I will add a little information about closed end funds. They trade like stocks. The concept of a closed end fund is similar to that of an open ended fund but with this difference. with a closed end fund, only a fixed amount of shares are issued. The money is then invested in the stock market on behalf of those who purchased the shares. Closed end funds do not trade at net asset value. They trade at whatever people are willing to pay for the shares. Many trade at a discount to net assets. Some trade at a premium. There is one other difference. Some closed end funds issue preferred stock as a means of leverage. Normally, closed end funds that invest in bonds. There is a site that has a listing of all closed end funds. Below is the link.

Q: What exactly is a mutual fund, and how do I invest in one?
I have some settlement money (about $28K) that I would like to invest. Everyone tells me to put it in a mutual fund. Can someone explain to me what exactly a mutual fund is? Will I be able to cash it out whenever, or do I have to keep it in for a certain number of years? Can I buy a mutual fund through Scottrade? What's the best mutual fund?

A: First what is a Mutual fund? It is a fund, managed usually by a team of people. This fund invests money in different securities. There are many different types of mutual funds. Some funds buy just stocks, they are made up of many different company's stock. They may have several million in GE, Exon Mobile, Wal Mart etc. Next, there are bond funds which invest in many different types of bonds. Some corporate bonds, government bonds, and municipal bonds. There are also index funds, which invest in certain securities associated with a certain index. For instance, there are S&P 500 index funds, meaning the fund mimics the S&P 500. So if the S&P is up 2% than your fund is up 2% for the day. This is the basic plot for mutual funds, there are many more types. Owning a mutual fund is like owning shares of stock. You can cash out when ever, there is no time limit or constraint. While you can buy mutual funds over the internet, it is best to go to a broker. There is usually no commission fee to purchase a mutual fund as would if you were buying stocks. Being new to invseting, you should get the advise of a broker. There is no best mutual fund, there are thousands of them, and certain people like certain funds. Some grow slow and steady with lower risk, while others have potential to grow very fast, but with more risk. Its a complicated concept at first, but you are making the right decision by investing in a mutual fund.

Q: How are mutual fund beneficiaries taxed?
I am the beneficiary of my father's mutual fund or IRA. When the money is distributed to me, does the IRS see that as income or as inheritance? How it is taxed?

A: since it was never taxed, it will be upon distribution, but you won't have to pay any of the penalties.

Q: Is it wise to invest in different mutual fund companies or just one?
Is it wise to invest in different mutual fund companies or just one company for maximum returns? My reason is that in case Company A fails, I still have a backup with other companies. What is your opinion on this, will it matter if I invest in different companies? What are the chances that a mutual fund company will actually fail/close? About diversification: isn't mutual funds already in itself diversification?

A: Mutual Fund companies tend to not fold, but I can understand your concern. But generally when people invest in funds they look at different types of funds - like large cap domestic, international, small cap domestic, emerging markets, etc. It certainly can't hurt you to go with different fund companies. I suggest you take a look at index funds - Vanguard and Fidelity have some good ones. They invest in a variety of markets and beat mutual funds over time. They also have low expense ratios. So if you want to look at seperate fund companies take a look at some of Vanguard's index funds.

Q: What is a good mutual fund to put my money in?
I'm a 24 year old recently graduated from college and got a job.. I want to start saving up and while the money is not being used for anything, I though I might as well put it to work. So what is a good mutual fund to put my money in?

A: your question should be, "what is an appropriate asset allocation for someone my age and risk tolerence?". if you really want to make money, forget the words "mutual fund". look into index funds and ETFs. funds matter not. asset allocation makes up abut 95% of a portfolio's returns over the last 50 years or so. it took me about 5 years out of college to learn this the hard way. check out ifa.com, ishares.com, and vanguard.com. happy investing.

Q: Why is it bad for a mutual fund to have too many assets?
I keep reading on morningstar and other finance sites about how "such and such a mutual fund is getting too bloated with assets," and that this is especially a problem for funds that focus on small-cap stocks. And I see that Vanguard and many other companies have closed funds to new investors--even Vanguard's Windsor II, which focuses on huge corporations, has restricted new investors. Let's say a mutual fund purchases more that 50% of a company, why is that bad? Isn't that what Warren Buffet's Berkshire Hathaway does?

A: Basically, the reason is that it becomes harder to "move the needle" as Warren Buffett says. In other words, the more money a particular fund has, the larger any particular position has to be to make an impact on the funds results. A $10 million investment, no matter how well it does isn't going to have much impact on a $50 billion fund. The larger the fund, the larger the investments needed to make a difference. The larger the minimum investment, the smaller number of choices a particular fund manager has, and theoretically, the less well he'll be able to do.

Q: What is the difference between a blend, value, and growth mutual fund? What is the best fund?
Can anyone tell me the difference between a blend, value, and growth mutual fund. Also in any kind of mutual fund, what is the best one to buy? Include what fund and what kind (blend, value, or growth), and why. Also include personal experiences if possible.

A: First, in any fund, buy a no-load. I recommend the Vanguard family because they have very low operating expenses. During any long-to-mid-term, this will be a major factor. as to Value, Growth, and Blend, I would characterize them this way: Growth: Low/No dividends, high P/E, compared to S&P 500 Value: Low P/E, compared to S&P 500 funds. Blend: A mixture (blend) of both Growth and Value stocks. One can utilize any broad "Average" , but S&P 500 is common The "best fund" depends on your age, goals, and (more or less) your patiences, needs, and what your financial condition is.

Q: Buying Vanguard mutual fund through Vanguard or a Broker?
I was planning on purchasing shares in Vanguard's 2055 retirement mutual fund. However there is a $3000 minimum initial deposit to start a fund. Does this minimum still apply if I bought shares in the fund through a low-cost broker such as Tradeking that let me purchase individual funds and stocks? Or would this fund not be available through them? If it is, would it make sense to buy it through them and avoid the fees associated with Vanguard? Tradeking is $4.95 per trade. I don't believe there are any other fees with them.

A: Mutual Funds No Load Purchases: $14.95 Sale: $14.95 The above is directly from TradeKing's web site. It will cost you $14.95 to buy Vanguard's funds. The funds that are free from TradeKing's fees are loaded funds that give TradeKing a kickback. So you pay even more via the load. Many of Vanguard's funds charge a $10 per year account maintence fee if you invest under $10,000 with the fund. Figure out how many years you intend to keep the fund and if so will the amount be under $10,000? Does the fund charge an annual fee? It may pay to pay TradeKing's fee if Vanguard's fee is not charged to you through TradeKing.

Q: How to decide which is the best mutual fund to invest in India. please also give answers to following.?
1.How to study mutual fund performance. 2.What are different types for example growth fund or reinvestment. Which one is better 3.At the moment which one is best option. 4.Some good web sites which will give reliable information on Mutual funds and how they are doing.

A: Pls visit MF sectionof www.moneycontrol.com . Free site . This has the comparision for all MF

Q: What is a good mutual fund to start with?
I want to begin investing and I believe a mutual fund is my best option. Should I go with one that tracks the S&P or one like the Vanguard Total Global Market fund? So many to chose from but whats a good starting fund? I know most Vanguard funds are 2,500 to open and thats fine. And its wise to continue putting money into your fund over the years correct?

A: S&P 500 Index Dollar Cost Average pref 4 times a money if poss, or no less than 1x per month. I prefer DCA 2 days before the 3rd Friday of each month and 3 days before the last day of every month.

Q: If my parent decides to open a mutual fund and then he dies,then how is the funds passed over?
I am 16 and my dad wants to open a mutual fund for the family,but what happens if he dies or something. How and who is the funds carried to. Do we need a will?A lawyer will be too much money. Will hais children have access to the funds?

A: Most mutual funds allow a beneficiary to be designated for just the event you describe. A will is almost always a good idea to settle all the implications of the estate.

Q: What happens to my mutual fund shares if the mutual fund company goes bankrupt?
I have my money invested in several mutual funds with a large mutual fund company. What happens if said mutual fund company goes bankrupt, maybe after fraud or an accounting scandal? Is my money insured in any way, or is it gone?

A: http://www.sec.gov/answers/sipc.htm

Q: Cashing out a mutual fund and owing the IRS?
I cashed out a $6,000 mutual fund and know I will owe a lot on my 2008 taxes. How can I start "paying back" the IRS now to avoid dept in April? I've started contributing more to my 401K to lower my taxable income and I've increased my W4 contributions to claim 0 and take out $50 extra per pay check. Any other suggestions?

A: It sounds like you're doing the right thing by contributing to a 401K and increasing your W4 contributions. My only suggestion to lower the amount you owe next April is to simply increase your $50 to a higher amount.

Q: What is better to invest in, a mutual fund of company stock?
what is the best investment for the long haul of making a person more money a mutual fund or company stock? Does anyone now of hot stock pic in either catagory?

A: Mutual funds offer diversification. However, if you want to buy stock for the long haul, buy the stock of a major bank and hold it. Like Bank of America or Citigroup.

Q: What is the best way to pick a long term mutual fund?
I am a 25 year old looking to invest 10K in mutual funds. I am not planning on touching it for many years to come. What is the best way to pick a long term mutual fund?

A: Index fund.