2010 January | Fundamental Financial Advice By Patria

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Jan 30

Asset allocation and Diversification, Wall Street E Online T

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Asset allocation means investing in different types of assets — stocks, bonds, cash. Diversification means finding the right mix of investments to cushion your portfolio against market downturns. International investments are getting popular in diversification strategies. But that’s not enough. You’ve gotta keep tweaking. As your portfolio grows, as your goals change, you may need to change that asset allocation. If you want to take less risk, you may exchange some bonds for more cash …

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Jan 30

I cannot believe that they are trying to put the two items on one bill. Why have we not been hearing about this and the farm subsidies bill that they passed? http://numbersusa.com/index

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BAS asked:

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Jan 30

A mutual fund is an investment company that invests a pool of funds belonging to many individuals in a portfolio of investments such as stocks and bonds. Each shareholder in the pool owns a percentage of the mutual fund’s (investment company’s) total portfolio.

The yield of a mutual fund evaluates the investment performance of the mutual fund by measuring the dividend income that the mutual fund pays to shareholders, as a percentage of their investment, after deducting any fund expenses. However, in order to calculate the yield of a mutual fund, we need first to calculate the net asset value of the mutual fund.

The net asset value (NAV) of the mutual fund depends on the value of the portfolio of the stocks. For example, a mutual fund sells 20 million shares at a price of $10 per share for a total of $200 million. The net asset value (NAV) of the mutual fund is the price per share, i.e. $10. If the investment company decides to invest in stocks that have higher market value and the market value of the stocks in the portfolio increases to $250 million, then the price per share would be $250 million / 10 million shares = $25 and this is the net asset value (NAV) of the mutual fund.

Having derived the net asset value (NAV) we can calculate the yield of the mutual fund. Assuming a net asset value (NAV) of $25 according to our example and a dividend paid to shareholders from the interest earned on the stocks in the portfolio of $2 then yield is calculated as the quotient of the dividend over the net asset value (NAV). Therefore, in our example the yield of the mutual fund is 2$ / $25 = 8%.

Important considerations

Normally, the yield of a mutual fund is annualized so that investors can follow easier their year returns.

A yield makes sense if investors have invested on the date that the yield is based on. Otherwise, it is a simple comparison of different funds’ yields.

A yield is directly related to market interest rates so that it follows exactly the market fluctuations.

A yield is calculated both based on simple (one time invested) and compounded (reinvested) interest rates.

Capital gains are not included in the calculations of the yield of a mutual fund because they cannot be accurately quantified since they are subject to market fluctuations.

Assuming above example of a net asset value (NAV) of $25 and a dividend of $2, we found that the yield is 8%. If the price per share decreases to $20 and therefore the net asset value (NAV) would be $20 instead of $25, then the yield of the mutual fund will be $2 / $20 = 10%. So, the yield increases, however the price per share has decreased. Therefore, investors should follow their investments on a regular basis in order to be able to reallocate their portfolio of stocks and keep control of the value of their portfolio as much as possible, given also the market fluctuations.

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Jan 30

I need to know about trust funds will you help?

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Jan 30

Get Reviews On Mutual Funds Stock And Investment Banker

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