The IRS rules for mutual fund cost basis reporting have changed effective January 1, 2012. Before 2012, investment companies were not required to report cost basis information to investors or the IRS when investors sold mutual fund shares. Investors were solely responsible for reporting their cost basis and capital gains to the IRS when they [...]
Mutual funds can be classified as either index funds or active funds. Index funds attempt to replicate the performance of a benchmark index by owning the same securities as the index in the same proportions as the index. Active funds attempt to perform better than a benchmark index by owning specific securities that may or [...]
Investors want to receive the highest possible return with the lowest possible risk. However, the risk/reward trade-off principle says we cannot increase our potential return without increasing our exposure to risk. Is that always true? The risk/reward principle is usually applicable for short-term investments, but when we consider long-term investments, we can maximize potential return with minimal exposure to risk. Consider the risk/reward [...]
According to the powers that be, the recession ended in June 2009. Glad that’s over. So looking forward, I guess the question of whether we are going to have a double dip recession or one long, drawn out recession has been answered. Since the recession ended in June of 2009, it appears the answer is [...]
ETFs or Exchange Traded Funds have been around since 1993, but their availability and use have proliferated remarkably in the last 10 years. As investors, we witness the marketing battle everyday between mutual fund companies and ETF providers as they vie for our business. So which is better – ETFs or mutual funds? As an investment [...]
Over the past 2 years or so, FMP has been holding emerging markets as a portion of our Core holdings in our various portfolios. At first you may ask yourself, “Why are they holding emerging markets in the core? I thought that would be more of a fringe or satellite holding. What are they thinking?” [...]
Investment returns should be evaluated and compared in reference to a specified length of time. A 7% total return is not meaningful performance data without knowing the length of time it took to earn the 7%. Likewise, comparing a 7% total return over three years versus a 7% total return over five years will not provide a fair comparison. To help people [...]
There are a lot of different ways to analyze investments, and with the technology available, there are more and more tools out there to help investors make decisions. Sometimes I see friends, family, and prospects get caught up in the trees and not even know which forest they are in. If you find yourself in [...]
A target-date retirement fund is a mutual fund composed an asset class mix that changes in allocation over time so the fund becomes more conservative as the investor approaches retirement. Many people are attracted to target-date retirement funds, also known as life-cycle funds or age-based funds, for their set-it-and-forget-it ease of management. They just select one mutual fund and keep contributing [...]
Bonds are historically less volatile than stocks, and because of this, investors who want to decrease the volatility of their portfolios often chose to increase their allocations to bonds and decrease their allocations to stocks. However, investors should be aware that bond investments still have inherent risks, some of which include credit risk, default risk, inflation risk, prepayment risk, reinvestment risk, and [...]