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Are Collective Trusts Different Than Mutual Funds?

gutenk — Thu, 28 Jul 2011 17:31:53 +0000

Are Collective Trusts Different Than Mutual Funds?

Article by Jeremy Lawton

An increasing number of employees at major companies may have noticed a type of investment choice available in their 401(k) plans which appears to be a mutual fund – but it isnâ??t. These investments, called collective investment trusts (CIT) or collective trust funds, can be even more successful than mutual funds with similar strategies. Itâ??s important to understand the main difference when you have the option of investing in a collective trust.

First, lets explain the differences between collective trusts and mutual funds. Mutual funds pool money from multiple individual investors inside the same â??mutualâ?? investment. There can be numerous money managers responsible for the maintenance of the fund, including buying and selling investments on behalf of the fund. Much like a mutual fund, a collective trust is formed by pooling money from investors and maintained by money managers. However, the investments are exclusive to institutions – i.e. cash originates from their 401(k) plans – and closed to private investors.

What’s the cost advantage of collective trusts and why should you care? Collective trusts can operate with decreased compliance costs than mutual funds for two reasons. To begin with, because the institution is offering the investment to a lot of employees, they are able to negotiate a lower cost because of the greater supply of money they are providing. Next, trusts are overseen by banking regulators rather than the Securities and Exchange Commission (SEC). Consequently, collective trusts do not have to abide by as many regulatory laws and typically have smaller expense ratios than mutual funds since they do not have as many costs to pass on to the investor. For anyone who is researching a specific collective trust, you will notice that it doesn’t have a ticker. This is because they are not regulated by the SEC and do not play by the same rules as other investments, like mutual funds.

Since collective trusts are fundamentally the same as mutual funds, but are less expensive to the investor, one may think the decision to invest in collective trusts is a “no-brainer.” Having said that, there is a drawback associated with not having to abide by as much regulation. For example, even though the absence of SEC oversight is definitely an advantage coming from a cost perspective, it leads to less openness in terms of the fund holdings. Many find it more challenging to compare collective trusts to other investments since they are not required to reveal the same amount of information.

Regardless of the alleged lowered degree of consumer safeguards, about 45 percent of 401(k) plans include collective trust options. Youâ??re very likely to have collective trusts within your retirement plan if you are working for a firm employing over 1,000 employees. Almost 70 percent of larger corporations offer CITs, as reported by Morningstar.

In summary, the gap between mutual funds and collective trusts might appear negligible at first glance, however the details could result in thousands and thousands of dollars variation within your 401(k) retirement account over 30 years. Collective trusts may be particularly confusing to the curious investor as a result of similarly named mutual funds with similar investing tactics. However, the Department of Labor is scheduled to unveil brand new regulations for retirement plan sponsors which might clarify the choices offered by your company. For now, you must take the initiative to recognize and analyze collective trusts – some may become an incredibly appealing addition in your retirement portfolio.

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Finally, if you are interested in more information about 401(k) accounts, including discussion regarding collective trust vs mutual fund, check out ModernSaver.com.

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Mutual Funds Better Than Indvidual Stocks ?

gutenk — Wed, 09 Feb 2011 17:33:38 +0000

Mutual Funds Better Than Indvidual Stocks ?

Article by John Foley

Though it cannot be said in general that mutual funds are always better than individual stocks, it still cannot be denied that they usually involve lower risks, less money and generally yield lower but safe returns.

It all depends on the risk attitude of the investor. This is understood clearly by looking at the disclaimer attached with any mutual fund options that are nearly identical with that applicable to any other (kind of) stock. They have their advantages and loopholes like any other form of investment. And as in other forms of investment, one has to be fully aware of potential pitfalls and while driving high with mutual funds, has to be alert enough to avoid them.

Mutual funds are seemingly the easiest and least stressful way to invest in the stock market. Quite a large amount of new money has been put into mutual funds during the past few years.

Briefly put, a mutual fund is a pool of money contributed to by individual investors, companies, and other organizations. There will be a fund manager hired to invest this cash with a primary goal that depends upon the type of fund. The manger usually diversifies in a manner such that the net average earning is expected to be considerably positive. S/he may be a fixed-income fund manager. In that case s/he would work hard to provide the highest return at the lowest risk. On the other hand a long-term growth manager should try at least to beat the Dow Jones Industrial Average or the S&P 500 in a given fiscal year.

But that is what any successful investor attempts to do, and anyone with a similar approach can be expected to make the same earnings.

It all depends really on the overall investment climate and the sectors in which funds are flowing in. Diversification is definitely a good approach when it comes to successful investing by a reasonable investor. But with mutual funds, there is that the controllers may over-diversify.

Diversification minimizes the inherent risks of stock trading by spreading out the capital over many stocks. But over-diversification is again a bad thing.

First, an investor gets into many funds that have significant mutual implications, thereby losing out on the full benefits of risk stretching that diversification affords.

Secondly, over-diversification may decrease your overall return. By hitting too many poor through mediocre funds, the investor reduces the return by missing the potential of a few well-managed funds.

It is true that mutual funds play it safe. This is because mutual funds are actively organized by a professional money manager who keeps constant checks on the stocks and bonds in the fund’s portfolio. As this is her/his primary occupation, s/he can devote much more time to choosing investments than an individual investor. This provides the investor with the peace of mind that comes with informed investing without the stress of analyzing financial statements or calculating financial ratios.

But on the negative side, a mutual fund, unless open-ended, must remain confined within a fixed portfolio. Even with open ended mutual funds, the range of potential is often low as compared to what is available to an investor free to choose any stock s/he likes.

Besides, mutual funds some times come as load funds in which the investor has to pay the sales commission on top of the net asset value of the fund’s shares. Also, the dollar-cost averaging strategy is just the same with mutual funds as to any common stock.

Of course, fixing such a plan can substantially reduce your long-term market risk and result in a higher net worth over a period of ten years or more.

Hence considering the stress, agony and risk that any stock may involve, mutual funds look a shade better than independent trading, if low but steady is ok for you.

Article Written By J. Foleyhttp://travelguy.typepad.com/investments

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Article Written By J. Foleyhttp://travelguy.typepad.com/investments

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The Foreign Exchange Sweeter Than You Lyrics

gutenk — Thu, 20 Jan 2011 17:30:59 +0000

The Foreign Exchange Sweeter Than You Lyrics

Article by melissa ricks

The Foreign Exchange Sweeter Than You Lyrics: The only effort you have to take is find out a reliable and dependable company which provides managed forex account. These are established by central banks and are used to regulate a currency in order to meet a country’s monetary policy. The currency class called Forex Trading Made E Z does not try and teach you everything there is to know about the FX markets which could take for ever, and get more info about The Foreign Exchange Sweeter Than You Lyrics below. This gives him the ability to possibly profit even in the event of a recession if he plays his cards right.In most cases this is by any means faster than a human trader would be able to react and place a call to make a trade thereby giving you an unparalleled advantage. But there are also institutional traders: banks and investment firms which work on a whole different level. All you get are simulations on paper knowing the closing prices or some figures from the vendor with no verification or audit. The truth of the matter is that I was floundering on the verge of washing out. These terms are used to indicate Forex rates that are calculated up to four decimal points and whether or not these are negative or positive movements. See more on The Foreign Exchange Sweeter Than You Lyrics and Uk Currency Symbol.You can use any broker you want to with the ‘FAP Turbo” software so if you already have a broker you don’t need to leave them and go to another broker. There are those that you can purchase and download online while there are those that must be loaded up through CDs onto your system. See more on The Foreign Exchange Sweeter Than You Lyrics. At any time they may also choose to drop off from the agreement. Once you are able to create your own account you can immediately make simulated trades and purchases and experience for yourself how a gain as well as a loss is like. Businesses that import and export goods and services need to exchange currencies to receive or make payments for goods they may have bought or services they may have rendered.It’s safe to say that this tip is the most important when it comes to learning the foreign exchange trading basics. I personally got sick and tired of hearing about the program on both sides so when I heard that they offered a trial or test period I decided to form my own opinion once and for all, also see more on The Foreign Exchange Sweeter Than You Lyrics. You should not attempt to start investing real funds until you fully understand all of its operations and have tested it using demo Forex accounts and are at a point where you are happy with the financial results it is producing for you. Also see more about Secret Settings For Forex Megadroid and Travelling Foreign Exchange Currencies. Forex trading takes advantage of the constant flux of the market buying and selling into and out of the ebbs and flows of the foreign exchange trading charts.

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Why you Should Trade Etfs & Mutual Funds Rather Than Individual Stocks

gutenk — Fri, 28 May 2010 06:56:00 +0000

You can be on your way to doubling your money in 3 years by trading Mutual Funds and Exchange Traded Funds (ETFs) rather than individual stocks.

DIVERSIFICATION

The most important reason is the diversification that Mutual Funds and Exchange Traded Funds (ETF) provide. With an individual stock you are exposed to the possibility that one of your stocks could get hit by bad news and plummet in price. It takes a long time to recover from one of these massive hits.

PROFESSIONAL MANAGEMENT

Skilled Mutual Funds managers spend every day determining which stocks to buy and sell. These managers companies have teams that examine quarterly and annual reports, interview Company executives; visit factories and review market share trends to get know the companies on a comprehensive basis, and avoid buying stocks when they are over-bought from a technical standpoint. There is no way an individual investor can compete with this level of sophistication.

ECONOMIES OF SCALE

Mutual Funds are able to take advantage of their buying and selling size to reduce transaction costs. This means a savings for the individual mutual fund investors enabling the individual investor to diversify without paying numerous commission charges involved in buying 15 to 20 individual stocks needed for diversification.

DIVISIBILITY

If someone only has $500 or $1,000 to invest, it is often insufficient to purchase an individual stock, especially after deducting commissions. Investors can buy mutual funds or add to their existing mutual fund holdings with a very small investment to keep their money working for them. With mutual funds, investors can hold fractional amounts as well.

GETTING STARTED

I invest my own money in every one of my Mutual Fund and Exchange Traded Funds trading systems. I subscribe to several advisory services to keep my universe of possible investments up to date. I utilize four different pieces of technical analysis software to determine which funds to buy, when to buy, and when it is time to sell.

I employ a strict stop loss and profit-protect methodology to keep my losses small and let my profits run. My approach is biased to the conservative side. I want to constantly upgrade my various mutual fund holdings so that I am holding the best mutual funds available.

Whenever I plan to buy or sell one of my holdings, I send my subscribers an email telling them exactly what I am doing, why I am doing it, and when I am plan to make the trades. I do the work so you don’t have to. And, importantly, it will take you less than 30 minutes per month to make the trades with your on-line broker. You too can join me and my fellow investors and double your money in the next 3 years.

Gerry Wollert has been trading stocks for over 40 years and mutual funds for over 25 years. He now manages his personal investments

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Safer Than Stocks, CDs, Bonds, Gold, Mutual Funds – High Yield Private Investments

gutenk — Sun, 25 Apr 2010 06:59:57 +0000

Higher Yield Private Investments Secured by Real Estate.

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Are Dividend Paying Stocks Better Than Tenants?

gutenk — Sun, 11 Apr 2010 07:06:49 +0000

Miller/Howard Investments explores the benefits of a dividend paying stock portfolio and explores the real estate paradigm. Part of the series Dividends: An Old Idea for a New Reality.

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Why Stock Options are Better than Mutual Funds

gutenk — Fri, 26 Feb 2010 07:01:17 +0000

Dr. Terry F Allen talks about how investing in a leveraged stock options portfolio is safer and gives an investor better odds at making profits than “traditional” stock purchasing and mutual funds.

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The Foreign Exchange – Sweeter Than You

gutenk — Tue, 23 Feb 2010 07:16:59 +0000

song from The Foreign Exchange’s album Leave It All Behind. Support The Foreign Exchange by ordering the album at www.theforeignexchangemusic.com

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MUTUAL FUNDS YIELD LESS THAN EQUITY

gutenk — Sat, 06 Feb 2010 07:04:47 +0000

MUTUAL FUNDS YIELD LESS THAN EQUITY

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Why People should Invest in Mutual Funds Than Directly Into Shares

gutenk — Thu, 13 Aug 2009 20:28:41 +0000

Why People should Invest in Mutual Funds Than Directly Into Shares Now a days, everybody is in a dilemma when comes for their hard earned money investment decisions in these volatile markets. Investment is a way which can multiply your money in many folds beyond your expectations and in similar way it can dry out your money completely if invested in wrongly avenues. Therefore, people are seeking advice from experienced professionals for investment activities. My experience & observation suggest that those people who have adopted ‘get rich quick mentality’ lost their money very soon because they did not do their ‘need based self assessment’ before making investment decisions. Through this article, I will try to explain various reasons why people should invest in mutual funds than directly investing in shares. First, mutual fund managers are highly experienced and well qualified to take decisions to invest domestically and internationally. Asset management companies keep the track record of every company which are in their portfolio or expected to be included. Asset management companies also have their own research team which constantly keeps focusing on performing sectors and sectors which are anticipated to out perform in coming future. Before making any decision, fund managers do fundamental analysis (this kind of analysis is done to find out the best scrips in the market) and technical analysis (this kind of analysis suggest when to enter and when to exit). Second, mutual fund gives you the advantage of diversification. In my most of the meetings with the investors I found that investors do not understand this point clearly so I will focus more on this point. Diversification is nothing but the allocation of assets into different sectors. Diversification minimizes the risk because money is invested into various industries, had that money been invested only in one industry / company it would have been exposed to more risk due to volatility and government policies pertaining to particular sector. Let’s take an example to elaborate this point. Investor ‘A’ invests Rs. 50,000 in company X, assumed this company is operating in telecom industry, @250 per share and acquires 200 shares with 3 years time horizon. Investor ‘B’ also invests Rs. 50,000 @ 20 and acquires 2500 units of this fund. This sectorial mutual fund is focusing on telecom industry only. Let’s see the prospects after 3 years down the line: INR / SHARE Year 1 Return % Company Name Allocation IP* Quarter I Quarter II Quarter III Quarter IV YOY Weighted X 25% 250 287. 5 316. 3 268. 8 279. 6 11. 8 3. 0 Y 10% 200 218. 0 239. 8 203. 8 212. 0 6. 0 0. 6 Z 25% 100 117. 0 128. 7 109. 4 113. 8 13. 8 3. 4 P 20% 300 366. 0 402. 6 342. 2 355. 9 18. 6 3. 7 Q 20% 400 480. 0 528. 0 448. 8 466. 8 16. 7 3. 3 Total 14. 1 IP stand for Investment Price or prices at which shares were purchased. Here, I have excluded the transaction cost From the above table it is clear that returns due to diversification are higher than investing in one particular share of the company. INR / SHARE Year 2 Return % Company Name Allocation CMP Quarter I Quarter II Quarter III Quarter IV YOY Weighted X 25% 279. 6 293. 5 322. 9 274. 5 285. 4 2. 1 0. 5 Y 10% 212. 0 252. 3 277. 5 235. 9 245. 3 15. 7 1. 6 Z 25% 113. 8 136. 5 150. 2 127. 7 132. 8 16. 7 4. 2 P 20% 355. 9 398. 6 438. 5 372. 7 387. 6 8. 9 1. 8 Q 20% 466. 8 490. 1 539. 1 458. 2 476. 6 2. 1 0. 4 Total 8. 5 Again here you will find out that returns due to diversification are 8. 5% vs. 2. 1%. It also conveys that fund manager is continuously gaining from the market and could be trusted for the investment purposes. INR / SHARE Year 3 Return % Company Name Allocation CMP Quarter I Quarter II Quarter III Quarter IV YOY Weighted X 25% 285. 4 314. 0 345. 4 293. 6 305. 3 7. 0 1. 7 Y 10% 245. 3 272. 3 299. 5 254. 6 264. 8 7. 9 0. 8 Z 25% 132. 8 175. 2 192. 8 163. 8 170. 4 28. 4 7. 1 P 20% 387. 6 418. 6 460. 5 391. 4 407. 1 5. 0 1. 0 Q 20% 476. 6 509. 9 560. 9 476. 8 495. 8 4. 0 0. 8 Total 11. 4 I think now, it is needless to say that diversification not only reduces the risk but also beneficial to garner more and safe returns. Total Returns In Three Years INR / SHARE Price Allocation Returns in % Company Name IP CMP Invt. ‘A’ Invt. ‘B’ Invt. ‘A’ Invt. ‘B’ X 250 305. 3 100% 25% 22% 6% Y 200 264. 8 10% 3% Z 100 170. 4 25% 18% P 300 407. 1 20% 7% Q 400 495. 8 20% 5% Total 22% 38% From the above table it is clear that mutual fund successfully managed to give 38% returns where as investment in company X has just provided 22%. Now just imagine if diversification is done in various sectors. Here, I did not consider dividend & other returns. Thirdly, mutual fund also provides various tax benefits. People can take tax advantages when they are investing in mutual funds and also when they are exiting from the schemes. Just they need to maintain and follow time horizon guidelines which SEBI and AMFI have put in place. Fourth, cost of managing the fund for expertise services is minimal. This benefit is due to higher volume. Before people used to say that, due to entry and exit load, investing in mutual fund is costlier but now as per SEBI guidelines there is not entry and exit load, if investment was made after August 4, 2009, for investing in mutual fund schemes. It means that services of the experienced and well skilled fund managers are free of cost. Thanks for the SEBI to make these services without cost. List of advantages of mutual fund is long and it is increasing as volatility & uncertainty is increasing in the market. As we know that there is nothing in this world which is flawless and mutual fund is of no exception. There are some mutual funds in India also which are not performing upto the mark. Investors need to be very cautious while investing in mutual funds. My next article will be based on ‘How to select the best mutual fund’ for investment purposes. Having said that all the views are personal and authenticity of these thoughts is based on various mutual funds & financial institutions websites. I can not be held responsible for any wrong information or untoward happening. .

Regards,
Anoop, CFA

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