A Purse of Your Own by Deborah Owens & Brenda Lane Richardson

Author:Deborah Owens & Brenda Lane Richardson
Language: eng
Format: epub
Publisher: Simon & Schuster
Published: 2010-07-15T00:00:00+00:00

Step 4. Compile a List of Funds

Look over editors’ picks for top-rated mutual funds from publications such as Kiplinger’s Personal Finance magazine or on the company’s website, www.kiplinger.com/investing/kip25. Money magazine’s seventy top fund selections can be found online at www.cnnmoney.com.

If you are interested in making your own selections, visit www.finance.yahoo.com, which provides screening tailored to your specific criteria. Print out the list and review the recommendations in the Morningstar Mutual Fund Guide, available in print or online. Other helpful research tools can be found at Value Line, which provides research and rankings on mutual funds as well as stocks, and at Lipper Analytical, which provides the most extensive of all research and analysis for mutual funds to financial and investment companies. This information is used on sites such as www.marketwatch.com and www.kiplinger.com, as well as www.thestreet.com.

Step 5. Read the fine Print on the Prospectus

By law, all mutual funds must state the type of securities the fund manager will invest in. You will find that information in the document called the prospectus. Many investors want to skip this step, but Katherine knew she had to read the fine print because this was the nest egg that would help send her daughters to college eventually. Even though she had narrowed her search, it was still important to make sure the recommendations were a good fit based on the stated objectives.

Take heart, ladies, and know that fund companies are creating more readable prospectuses and the SEC now requires a reader-friendly introductory section. A prospectus may not read like the latest mystery thriller or romance novel, but entertainment is not what we seek by laboring through this exercise. A bright future and a full purse could depend on what is inside those pages. You must know by now that I am an advocate for looking under the hood. Having a Wealthy System requires you to roll up your sleeves so there are no surprises.

The SEC doesn’t endorse any investment product, but it works to ensure that the prospectus meets legal requirements. The prospectus not only details the objective of the fund, but also includes information on fees, performance history, the fund manager’s resume, and a number of other helpful details that can assist you with making an informed decision.

You will want to get clear on the fund’s past performance. When you see a fund’s average annual return quoted in the paper or in an advertisement, recognize that the return quoted is based on a certain period of time. Not all investors earned that return because not everyone purchased on December 31 of the prior year, or whatever dates the return represents. And remember that past results are no guarantee of future returns.

Step 6. Determine How Much the Funds Would Cost

Of course you need to know how the price of a mutual fund share is calculated. The price of a mutual fund share is called the “net asset value” or NAV. The NAV is calculated by totaling the value of all the stocks and bonds

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