A mutual fund's growth, income dividends and capital gains distribution are important considerations
in making an investment that helps maximize gains in a positive market and minimize losses in a negative
market.
There are many factors to consider and evaluate before making an investment. The performance provides the current net asset value (share price) - year-to-date return. It can be measured
on the fund’s alpha, beta, yield, return, risk, etc.
For example, the beta is a measurement of a fund's volatility compared to the Standard & Poor's 500 index.
As of July 23,
2008, the S&P 500 is -12.68%.
The total return performance is a percentage figure showing a mutual fund's gain in net asset value, plus any gains from reinvestment
of dividend income or capital gains.
The dividends and interest earned by a fund on its investment
is the fund’s income. Many equity mutual funds distribute income quarterly. A Fund selling an investment
security for a higher price than originally paid, has a gain. A Fund selling an investment security for a lower price than
originally paid, has a loss. If the investment security is held by the mutual fund for more than one year, the gain
or loss will be a long-term capital gain or loss. If the investment security is held by the fund for less than one year, the
gain or loss will be a short-term capital gain. Mutual funds gains and losses are netted together and when the fund has a
net gain, that gain is usually distributed to the shareholder once a year.
The current 15% tax rate on capital gains and
dividends that Congress approved will expire after 2011. At that time, dividends will be taxed at ordinary income tax
rates and capital gains at 20%. However; legislation is being considered to extend these contribution limits. Another
bill in legislation is targeted to encourage personal savings in mutual funds by deferring taxation on automatically reinvested
capital gains until the shares are sold. Currently capital gains are taxed each year even if they were reinvested. An
excellent source of additonal information can be found at www.FundingYourFuture.org.
Where can you find factual and current information to make an investment decision?
Each mutual fund is assigned
a five digit symbol, the mutual fund ticker symbol, which is your key to unlock a wealth of investment data.
Most Internet financial search engines like Finance.Google.com,
Finance.Yahoo.com, LipperWeb.com provide information needed to make decisions based on facts. To view the vast resource
of mutual fund data readily available, the website requires the ticker symbol placed in the dialog box.
Here is a thumbnail sketch of the invaluable type of source material
provided.
Profile: lists the mutual fund's family - address - toll free number - name of the Manager
and tenure - inception date - net assets - investment category - investment objective, etc.
Purchase:
includes the minimum initial purchase - minimum initial IRA purchase - maximum 12b1 fee - maximum front end sales load - maximum
deferred sales load - brokerage availability.
Performance: provides the current net asset value (share
price) - year-to-date return - long-term average return - best one/three year total return - worst one/three year total return
- performance vs. benchmarks.
Risk: shows the risk rating - 3 year Alpha rating - 3 year Beta rating
- 5 year Alpha rating - 5 year Beta rating - total expense ratings
Investment Holdings: list the top 10 investments by company name,
trade symbol, percent of asset investment, etc.
Portfolio: percent of cash, stocks, bonds, and other.
Fund Management: portfolio manager name and bio, fund address
including Email address and 800 number.
Good luck on your investing future and always read
the mutual fund's prospectus before making an investment.
