| With over 6,000 mutual funds available, it may be | | | | as easy as leisurely clicking a link. There are many |
| tempting to pick funds from a popular star or | | | | available classes that are free, or via email and |
| index rating system. Savvy investors, however, | | | | some that may cost a bill or two to enter a site. |
| balance multiple factors in their selection process. | | | | Or if you'd prefer, take a class at local colleges or |
| Ratings represent only the historical performance | | | | universities which offer that immediate one on |
| of funds and cannot predict the future. | | | | one support available through that type of |
| Performance consistency, management skill, and | | | | arrangement. Your local library or museum may |
| expense limitations are among the many factors | | | | schedule classes or speakers covering a variety |
| that influence a fund’s prospects. | | | | of subjects, too. Some locations even award |
| But, most people who “invest” don’t | | | | certificates after completion if that is your |
| study the market. They don’t understand it, | | | | requirement. |
| and they don’t have time to manage their | | | | When calculating your basis after selling a mutual |
| portfolio wisely. That’s where mutual funds | | | | fund, it's easy to forget to factor in the dividends |
| come in. I respect that other people have other | | | | and capital gains distributions you reinvested in the |
| opinions, and certainly not all mutual funds are well | | | | fund. The IRS considers these distributions as |
| managed – you MUST choose wisely and use | | | | taxable earnings in the year they are made. As a |
| appropriate caution! But, for most folks, a good, | | | | result, you have already paid taxes on them. By |
| solid, boring mutual fund is the golden path to | | | | failing to add these distributions to your basis, you |
| riches. | | | | will end up reporting a larger gain than you |
| Index funds that track any of the major indexes | | | | received from the sale, and ultimately paying |
| are just taking advantage of the concept of | | | | more in taxes than necessary. |
| diversification. The only remaining risk is whether | | | | While money-market funds are safe, their yields |
| the entire market goes up or goes down and one | | | | are so low they hardly qualify as investments. In |
| can switch to a fund that is designed to profit | | | | fact, the average seven-day yield on |
| from a down market when such action is called | | | | money-market funds is just 0.70 percent. Since |
| for. | | | | the average management fee for these funds is |
| But here is the key point: When you accrue hotel | | | | 0.60 percent, it does not take a genius to see |
| points or intend to use some promotion toward | | | | that putting your capital in a money-market fund |
| free nights, make the most of what they offer! | | | | is only slightly better than stashing it under your |
| Just as you would use those free nights you earn | | | | mattress. But, because the yields on |
| only at hotels which might otherwise be out of | | | | money-market funds track changes in market |
| your budget, redeem your frequent flyer miles | | | | rates with only a short lag, these funds could be |
| for the most expensive air tickets in business or | | | | yielding substantially more than 0.70 percent by |
| first class. | | | | the end of the year if the Federal Reserve |
| If there is an interest there is a class for it. And | | | | continues to hike rates as expected. |
| now that there's the internet taking a class is just | | | | |