Mutual funds offer a number of valuable services that are unique to this type of investment and that are helpful and appealing to investors.
Convenience Mutual funds are extremely convenient for investors. Funds make it easy to open an account and invest in and sell shares. Fund prices are widely quoted. Services include toll-free telephone numbers, detailed records of transactions, and various checking and savings alternatives. Funds handle all the paperwork and record keeping, including accounting for fractional shares, so it is simple for investors to calculate taxable gains and losses when shares are sold.
Ease of Buying and Selling Shares Opening an account with a mutual fund company is just as simple as opening a checking account. After sending the fund your initial investment, you can easily buy more shares. Any number of shares can be sold at any time, or you can simply ask that a specific dollar amount be taken out by selling the appropriate number of shares. Each share is redeemed at the closing price that is, the NAV- at the end of the trading day. Shares can be bought and sold by communicating with the company via telephone, wire, fax, mail, or online.
Check Writing and Electronic Transfers Mutual funds often offer interestearning money market mutual funds in which investors can accumulate cash, accept dividends, or hold their money while making decisions about investing. They can write checks from money market funds. A money market fund invests exclusively in cash and cash equivalents. Investors can electronically transfer funds to and from mutual funds and banks.
Distribution of or Automatic Reinvestment of Income and Capital Gains Unlike most other investments, mutual funds allow investors to choose to receive interest, dividends, and capital gains payments or have them automatically reinvested to purchase additional fund shares (often without paying any commissions). This is automatic reinvestment, and it produces the same effects as the compounding of interest because the investor earns money on past earnings. Fractional shares are acquired as needed. Automatic reinvestment is one of the most appealing aspects of mutual funds for investors. Most shareholders reinvest their mutual fund income as this keeps all their capital fully invested because it is wise to do so, as illustrated in Figure 15.3.
Telephone and Internet Exchange Privileges An exchange privilege (also called a switching, conversion, or transfer privilege) permits mutual fund shareholders to easily swap shares on a dollar-for-dollar basis for shares in another mutual fund within a mutual fund family. Telephone and online transfers from one fund to another, such as moving money from a domestic stock fund to a Taiwan international fund, can be accomplished at no cost or for only a small charge, typically $5 or $10 per transaction, called an exchange fee. A mutual fund family, and there are more than 400 (see http://biz.yahoo.com/p/fam/a-b.html), is an investment management company that offers a number of different funds to the investing public, each with its own investment objectives.
Beneficiary Designation When opening a mutual fund account, the investor is given the opportunity to complete a form to designate a beneficiary in case of the investor’s death. A beneficiary designation enables the shareholder to name one or more beneficiaries so that the proceeds go to them without going through probate
Automatic Investment Funds often allow investors to make periodic monthly or quarterly payments using money automatically transferred from their bank accounts or paychecks to the mutual fund company. You can invest as little as $25 monthly or quarterly. You can change your investment selections without penalty by contacting the fund. This is an example of dollar-cost averaging. By regularly investing in mutual funds, you can build a substantial portfolio of assets over time.
Convenience Mutual funds are extremely convenient for investors. Funds make it easy to open an account and invest in and sell shares. Fund prices are widely quoted. Services include toll-free telephone numbers, detailed records of transactions, and various checking and savings alternatives. Funds handle all the paperwork and record keeping, including accounting for fractional shares, so it is simple for investors to calculate taxable gains and losses when shares are sold.
Ease of Buying and Selling Shares Opening an account with a mutual fund company is just as simple as opening a checking account. After sending the fund your initial investment, you can easily buy more shares. Any number of shares can be sold at any time, or you can simply ask that a specific dollar amount be taken out by selling the appropriate number of shares. Each share is redeemed at the closing price that is, the NAV- at the end of the trading day. Shares can be bought and sold by communicating with the company via telephone, wire, fax, mail, or online.
Check Writing and Electronic Transfers Mutual funds often offer interestearning money market mutual funds in which investors can accumulate cash, accept dividends, or hold their money while making decisions about investing. They can write checks from money market funds. A money market fund invests exclusively in cash and cash equivalents. Investors can electronically transfer funds to and from mutual funds and banks.
Distribution of or Automatic Reinvestment of Income and Capital Gains Unlike most other investments, mutual funds allow investors to choose to receive interest, dividends, and capital gains payments or have them automatically reinvested to purchase additional fund shares (often without paying any commissions). This is automatic reinvestment, and it produces the same effects as the compounding of interest because the investor earns money on past earnings. Fractional shares are acquired as needed. Automatic reinvestment is one of the most appealing aspects of mutual funds for investors. Most shareholders reinvest their mutual fund income as this keeps all their capital fully invested because it is wise to do so, as illustrated in Figure 15.3.
Telephone and Internet Exchange Privileges An exchange privilege (also called a switching, conversion, or transfer privilege) permits mutual fund shareholders to easily swap shares on a dollar-for-dollar basis for shares in another mutual fund within a mutual fund family. Telephone and online transfers from one fund to another, such as moving money from a domestic stock fund to a Taiwan international fund, can be accomplished at no cost or for only a small charge, typically $5 or $10 per transaction, called an exchange fee. A mutual fund family, and there are more than 400 (see http://biz.yahoo.com/p/fam/a-b.html), is an investment management company that offers a number of different funds to the investing public, each with its own investment objectives.
Beneficiary Designation When opening a mutual fund account, the investor is given the opportunity to complete a form to designate a beneficiary in case of the investor’s death. A beneficiary designation enables the shareholder to name one or more beneficiaries so that the proceeds go to them without going through probate
Automatic Investment Funds often allow investors to make periodic monthly or quarterly payments using money automatically transferred from their bank accounts or paychecks to the mutual fund company. You can invest as little as $25 monthly or quarterly. You can change your investment selections without penalty by contacting the fund. This is an example of dollar-cost averaging. By regularly investing in mutual funds, you can build a substantial portfolio of assets over time.
Effortless Establishment of Retirement Plans Mutual funds are perhaps the best option available to people saving for retirement through 401(k) plans and IRAs . An employee can direct his employer to transfer a specified dollar amount from every paycheck to a mutual fund to buy shares for a 401(k) plan; individuals can buy shares for their IRA accounts, too.
Multiple Income Withdrawal Options Mutual funds offer withdrawal options (also called systematic withdrawal plans) to shareholders who want to receive income on a regular basis from their mutual fund investments. Once enrolled in a withdrawal plan, the minimum withdrawal amount is $50. The fund forwards the amounts to you (or to anyone you designate) at regular intervals (monthly or quarterly). You can make regular withdrawals by (1) taking a set dollar amount each month, (2) cashing in a set number of shares each month, (3) taking the current income as cash, or (4) taking a portion of the asset growth.
Multiple Income Withdrawal Options Mutual funds offer withdrawal options (also called systematic withdrawal plans) to shareholders who want to receive income on a regular basis from their mutual fund investments. Once enrolled in a withdrawal plan, the minimum withdrawal amount is $50. The fund forwards the amounts to you (or to anyone you designate) at regular intervals (monthly or quarterly). You can make regular withdrawals by (1) taking a set dollar amount each month, (2) cashing in a set number of shares each month, (3) taking the current income as cash, or (4) taking a portion of the asset growth.
.
0 comments:
Post a Comment