What is a Mutual Fund?

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A mutual fund is a type of investment in which individu­als can pool their money to buy various types of securities, such as bonds and stocks. Mutual funds generally are sound investment options for the low-budget investor since they allow for variegation and professional management. Several mutual funds invest in fast-growing and aggressive companies, while some invest in more static "blue chip" stocks.  Just like in most investments, you could lose money as well as profit from it.  Choose your fund based on cost, risk, and track record.

Mutual funds operate to produce profit, first for the company managing your funds and second, for you, the investor. The company and salespeople make revenues through fee systems. There are two types of fees structures: front-load and no-load. Front-load mutual funds charge a fee once you purchase your shares, thus your initial investment is reduced by the amount of the fee. "No-load," on the other hand, means that instead of charging you up front, the fee is amortized over a number of years. Theoretically, a no-load fund should earn more since more of your money is working for you. Pretty much, there is little difference between the two.

A lot of mutual fund companies offer investors the flexibility of flipping their investments among various funds in their selected group of funds. Hence, you are able to switch from growth stocks to blue chip stocks or from bonds to stocks, or even to a money market account, where your funds are held in cash.

This is a helpful alternative. If interest rates are high, and stock prices are low, you will consider shifting to an interest-bearing account. Then, when stock prices oscillate up, you could shift to a secure stock fund. Most reputable business magazines evaluate the track records of mutual funds on a regular basis.  It is worth con­sulting these financial publications for selections.

© Athena G

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What is a Certificate of Deposit?

A CD or certificate of deposit is an interest-bearing note issued by a bank. These are time-related notes that grow and are payable according to your contractual arrangement with the bank. The time period may vary from thirty days to ten years. Typically, the longer the maturity time period, the higher the interest earned. Early withdrawal results in forfeiture of a substantial portion of the interest.

Certificate of deposits are insured up to $100,000 per depositor if the issuing bank is a member of the Federal Depositors' Insurance Corporation (FDIC). Those issued by a Savings and Loan should be insured by the Federal Savings and Loan Insurance Corpo­ration (FSLIC).

© Athena G

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Advantages and Disadvantages of Home Refinancing

What are the advantages and disadvantages of refinancing a home if the prevailing interest rates are lower than the mortgage rate?

Many individuals refinance their home  if they can get a lower interest rate. Still, one needs to deliberate the additional costs. Primarily, the homeowner has to pay a loan up-front fee for the processing of a new loan, and you possibly will have to pay-off the penalty on the previous loan. In addition, you will be charged with attorney's fees, closing costs, etc.

If you plan to stay in the home for a long period of time, or longer than three years, you  may be able to regain the expenses with the lower interest rate (if the new  rate is at least two percent lower than the old one). But if you aim to put up the property for sale soon, you may actually pass up a benefit. Your former loan may be assumable, even if it has a higher rate, and the new loan may not be. So if the rates go up again and you try to sell your home, you may encounter difficulty because the purchaser would be required to pay the latest interest rate.

Normally, if you have plans of settling in your home for several years and you could lower the interest rate by refinancing, it's a good idea.

Strategies on Investing Your Savings 

What is Homeowner’s Insurance Policy?

© 2011 Athena Goodlight

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Is an Additional Retirement Plan Needed Aside from Social Security?

Many individuals approaching retire­ment age may depend on Social Security as their primary income source. With the things people are hearing about how underfunded the system is, it is not unusual that doubts abound on how secure our Social Security really is.

The most estimable matter that anybody can do is offer an opinion on the financial competence of the Social Security system.  As of now, those who are already receiving benefits will be covered to the extent of the government's capacity.

The potential problems for them are twofold: first off, inflation can easily devaluate any fixed income retirement plan. Social Security has a built-in cost-of-living adjuster, but any extended inflationary cycle would almost certainly involve necessary modification. This can happen if the government is deficient in funds to override double-digit inflation. Second, the trend in Congress is aimed at shifting costs, such as Medicare, to the recipients and taxing benefits at a later date. Either of these can create mayhem when you're living on a limited income.

If a married retired couple will both be living off on retirement benefits, and one faces death, the survivor may have to deal with inade­quate income to fund the daily needs. It would be best to have another income source, such as a part time job and formulate a sav­ings plan that could eventually provide extra income outside of Social Security.

For younger workers just getting into the system, the future of Social Security cannot be fully depended upon.  If there will be fewer new workers contributing to the sys­tem, and recipients are living longer, this would cause a big problem if not remedied by the government.  It is almost certain that retirement ages will be pushed back, and benefits will be cut down beyond in a few decades from now. In 1935 the system started with seventeen contribu­tors for each recipient. By 1980 it was seven to one, by the year 2000 about four to one. If this trend stays, by 2025 there will be only two contributors for every recipient.  The worse that could happen is that, the system will be bankrupt earlier than expected. It is just sensible for anyone to have an alternate retirement plan.

The Best Options for Long Term Retirement Planning

© 2011 Athena Goodlight

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What is Homeowner’s Insurance Policy?

A homeowner’s insurance policy is a comprehen­sive insurance program that covers the home, its con­tents, and any liability linked with the property. Typically, a homeowner’s policy is the least expensive way of insuring a home.

Individuals or families, who buy a house, will most likely be offered a fire insurance policy by the mort­gage company. First time homeowners may not be aware that there are other options. More often, they will not be informed either. Later, they will discover that they could have bought a homeowner’s pol­icy for nearly half of what was paid. It pays to do some research.

What options are available in homeowner’s insurance policies?  READ MORE

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