Retirement and mutual funds seem to go together like bread and butter. Mutual funds are when people pool their money together and use it to buy securities. These investors each own shares in the mutual fund in direct portion to the amount they have invested. Each share represents ownership of part of securities owned by the mutual fund. The price of a share is based on the current value of the fund's investments. If the fund's investments increase in value, then the fund share price rises. Conversely, if the fund's investments decrease in value, then the fund share price declines.
At the end of every trading day, the fund totals the value of all the securities in its portfolio and divides the portfolio value by the number of shares outstanding. This gives you the mutual fund's net asset value (NAV) - the price of a single share of the fund. See the formula below.
|NAV =||Total Value of Assets Owned by a Fund||- Fund Liabilities|
|Number of Shares Outstanding|
Mutual funds have many advantages and disadvantages. The biggest advantage to investing through a mutual fund is its diversification. Fees, on the other hand, are a fund's largest disadvantage. Fees are used to pay professional money managers to direct the mutual fund. Fees charged by mutual funds vary. Legally a mutual fund can charge each of the following fees as long as it lists it in its prospectus.
An alternative to investing in mutual funds for your retirement is joining an investment club. Investment clubs are a group of people who pool their money to buy securities, just like mutual funds. These groups meet on a regular basis, either in person or online. During these regular meetings, the members of the club socialize, study stocks and learn about investing and personal finance. They offer all the advantages of a mutual fund, but less the fees that can quickly drain a portfolio. You can learn more about investment clubs from the industry leader BetterInvesting.
The key to developing a successful retirement portfolio is not to simply choose the right mutual funds, although that can be an important element. But, rather to educate yourself about finance and investing so you can choose the best investments for your goals.
How do I educate myself on the latest news impacting my retirement?
Bob's Free Retirement Calculator is a great tool that can begin to help you answer some of these questions. By understanding your current financial situation and being able to project various scenarios you will better understand your retirement options and create a financial snap shot of your future. Using Bob's Free Retirement Calculator, in conjunction with working with a qualified and trusted retirement planning consultant in your area will provide a complete financial analysis you can depend on for many years to come. Included will be the Financial Tips & Hints newsletter.