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Sherry Tingley

Mutual Funds For Dummies

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Mutual funds are an investment vehicle that is made up of a pool of funds.  The funds are then invested by professional manager(s) in a variety of companies. The funds can include securities, stocks, bonds, equities and other investments. The benefits of mutual funds for the small investor is a diversified portfolio which would be hard (if not impossible) to create with a small amount of capital. The investor’s money is invested in many different companies which can mitigate  investment risks. This allows individuals to avoid putting all of their “eggs in one basket.” Usually people don’t have large sums of money to invest so by pooling money and investing as a team, their buying power is greater than if they invested by themselves.

Each mutual fund has professional managers that manage the pool of the funds. When researching which mutual funds to invest in, it is wise to look at the length of time the managers have been managing the fund. Those that have been doing it for many years, obviously have more experience that is measured by the various performance related graphs.

Asset Allocation

The new investor will have difficulty deciding what funds to invest in unless they have some guidance and understand how to interpret the data provided to them. Everyone has a different goal in mind when investing. Some general guidelines are to make equal investments in each type of funds. There are four types of mutual funds: Large Cap Funds, Mid Cap Funds, Small Cap Funds and International Funds. Equally investing in each type of fund can help to reduce the volatility of the markets.

Researching Mutual Funds

Mutual Fund Growth Chart
ING Funds Performance - Click For Larger View

Technology has made finding good funds to invest in much simpler than you might think. All of the fund performance data is collected and shown in a variety of ways.

The performance of the fund over time can be compared with the S&P 500 index. This index began in 1957. The S&P 500 index shows the top 500 large cap stocks. These companies have growth stocks and value stocks. The index is considered a “bellweather” of the United States economy.

The companies in the S&P 500 index are chosen by a committee to represent the industries in the U.S. economy. It has a wide variety of industry sectors included in it. The consumer discretionary sector includes companies like Home Depot, Lowe’s, Best Buy, Macy’s, Kohls, MacDonalds and Starbucks. Consumer Staples include Clorox, Walmart, Coca Cola and Walgreens. The energy sector includes companies like Exxon, Chevron, Hess Corporation and Haliburton Co. The financial sector includes companies like Citi Group, Etrade, Wells Fargo, Morgan Stanley and American Express. Health care, industrials, information technology, materials, telecommunications and utilities are the remaining sectors of companies listed in the S&P 500.

You can see the performance of every mutual fund compared to the performance of the S&P 500. You can also see the growth of a $10,000 investment over a 10 year period of time. This data can help you make guided choices and increase your chances of financial growth.

This information is meant to help you improve your knowledge about investing in mutual funds. There is no guarantee of your success in investing. You need to make sure you research the funds you want to invest in and see if they match your investing strategies and your tolerance of risk.

Purchasing mutual funds can be done online and doesn’t require you writing out checks.

Sherry Tingley

Tips For New Business Startups and Entrepreneurs

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New entrepreneurs are developing new business ideas in record time. With Internet coding hackathons, some business plans and products are created within a 48 hour window of time. The chances of new businesses succeeding on the Internet increase as time goes by. You may be in this group of new entrepreneurs out of necessity, choice or pure passion for having control of your financial lives.

Embarking on an entrepreneurial adventure is more likely to be both successful and satisfying if you examine your reasons to start a new business and be sure that you are on course to pursue what you really want.

Noam Wasserman, associate professor at Harvard Business School, says “If you’re starting a new company, you probably already know that a crazy variety of land mines await you.” In his new book, “The Founder’s Dilemma: Anticipating and Avoiding the Pitfalls That Can Sink a Startup,” which will be published later this year, he gives pointers and tips to identifying the potential problems involved in starting a new business. He borrows from his Harvard classes on entrepreneurship for the compelling content.

Wasserman collaborated with Timothy Butler, a senior fellow and director of career development programs at Harvard to survey some 2,000 founders relative to motivation. They divided the participants by gender and age. The data was compared with non-entrepreneurs who also ranked the possible motivations. Those with an entrepreneurial spirit tended to focus on autonomy and power, while those in the non-entrepreneurial group say to a greater degree that they valued security and a congenial work environment above other motivators.

He lists the seven most common motivators entrepreneurs have for starting a new business. The results of a survey (which vary between men and women) suggest common reasons people pursue business startups.

AUTONOMY: If this is your first objective, don’t take on partners or significant investors. The downside could be slower growth or a smaller business initially, but the upside is that you have ultimate control. This advice is for those who want independence above all, including financial gain.

POWER AND INFLUENCE: If this is your motivation you may want to examine some problems associated with bringing on partners. Two like-minded partners can quickly find themselves in headlocks if each aims to be CEO. Money and hiring practices can also lead to logger-heads if there is no clear definition of who does what. Founders in this category may have trouble letting others do their jobs.

MANAGING PEOPLE: This motivation can lead to frustration if there is a disconnect between yourself as manager and those you want to manage. It takes some adjusting as the manager learns to let the doer do what he is hired to do. If you are bent on hiring, counseling, evaluating and rewarding, Wasserman advises keeping the business small.

FINANCIAL GAIN: If gain comes first, the entrepreneur may have to give up some control when seeking partners or professional investors. In studying the problem, Wasserman said, those who demanded full control of a board and CEO realized an equity stake 52 percent less valuable, on average, than those who shared significant decision-making authority with others. He calls the push-and-pull between autonomy/power and influence/financial gain as the “rich versus king” dilemma.

ALTRUISM: Nonprofit or socially responsible companies best fit this motivation. It requires that you make decisions based on what’s best for others, rather than what’s best for your bottom line. There may be other ways to accomplish what you envision besides creating a traditional company.

VARIETY: You can accomplish this by starting new companies or by exploring new product lines and markets. Employees may have ideas on developing new ideas in-house. Studies indicate that variety becomes more important to entrepreneurs as they age, so strong support by a partner is important.

INTELLECTUAL CHALLENGE: To satisfy this craving, the answer is to diversify. This, too, is a motivator that may carry more weight as you get on in life. Consider starting special projects that relate to your next line of products or extension of the company. Devise projects that exercise your curiosity.

Wasserman suggests that “people problems are responsible for a significant portion of startup failures, and that entrepreneurs tend to underestimate their potentially dangerous long-term effects.” When starting a new business keep in mind what your long term goals are and how to best achieve those goals.

Keep your business accounting simple by using QuickBooks from the beginning of your new business.

How To Control Your Privacy On Facebook

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When you have over 500 friends on Facebook, you may think that you are stuck with reading news feeds from everyone. Save yourself some time by organizing your streaming updates. Facebook has made it very easy to read news feeds from only those you are interested in following.

Facebook Lists

How do you do filter out your stream of updates? Through Facebook Lists. Facebook lists make it possible for you to organize your friends into groups. You decide the group names and you pick the people you want in your groups. You might organize by family members, close friends, friends in the geographic area you live, work friends, high school friends or special interests like hobbies.

You will notice on the left side of the page a column called lists. If you hover over the word “lists” you can the word “more” to the right of the lists. Click on more. You will see a list of any current lists you have created. You can click on “create lists” to add new lists. There you will be asked to choose people you want to assign to the new list.

When you want to see the updates from each list, you just click on list name which is located on the left side of your Facebook account. You will save hours of reading through posts by people you really have little interest in following.

Smart Lists

What is a smart list? Facebook has created a function that will create lists automatically for you based on your profile. If you have listed a school you have attended, the list will appear automatically. Work, school, family and city are common auto created lists.

Control Who Sees Your Updates

Probably the most important privacy feature you should learn to use is choosing the audience of your status updates. When you make an update, there is now a drop down list in the bottom right corner of the status update box. This is where you can select which list you want to post your updates to. This allows you to choose who sees and reads your posts. Gone are the days where everybody sees all your posts. Finally a decent way to reclaim your privacy.

Using these features of Facebook can really help you enjoy the social experience much more. So if you have been hesitant to post because you are concerned about who sees and reads your posts, that problem is now solved. Share your private posts with those you actually want to share with.

Find out more about the author at the popular Personal Finance Blog, where you can share success stories about business start ups or get outstanding deals on business checks.

The 80-20 Rule Of Personal Finance

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Although history has shown us that there are many practical applications for the 80-20 rule, it has rarely been used in the field of personal finance.

Yes, there is the concept that the richest 20% of the world’s population controls 80% of the world’s income. And yes, the original use of the 80-20 rule comes from the notion that 80% of the “results” come from 20% of the “efforts.”

However, the question is, how can the 80-20 rule be applied to personal finance? The basics of personal finance can be summarized with two verbs: spending and earning. How well you do each one of those activities determines your personal wealth.

The mind-set of many people when it comes to spending is rather disastrous. Their spending goals may be just to spend a little less than they earn to cover their monthly expenses. When they ask themselves if they can afford something, they usually do the simple math. Does my monthly income cover the  amount of money this item will cost me? If the answer is yes, they give themselves permission to spend.

When considering the earning part of the equation, many think  they are stuck with decisions they made for themselves when they were in their early 20’s. College and job-training plans were made then and hopefully carried out as well. However, in retrospect how many people really know what they want at that age? So people get trained  for careers. Then get comfortable performing their jobs. It doesn’t take too long before buyer’s remorse sets in and they realize their choice of profession did not meet their needs.

The personal finance decisions they now make are mostly centered around budgeting and living within their means. Maybe 80% of their personal finance planning is spent doing this. How can I make my dollars stretch further? How can I enjoy life the most on what I have?

Maybe 20% of their personal finance attention is spent on increasing their earning potential. They may have these thoughts: How can they work harder to get the next job promotion? What will it take to impress the supervisor or boss? Would another job pay more money?

That type of split-thinking – 80% on budgeting and 20% on increasing income – is almost a boiling frog syndrome. You get used to living a certain way and it becomes comfortable. Before long you are slowly killing your drive.

What if you reversed the equation? Let’s say that you spent 20% of your personal-finance planning and thinking time being budget conscious, spending when necessary and covering your monthly bills. Then spending 80% of your time thinking of additional ways you can earn money. This gives your creative brain, more time to do what it was meant to do. Enjoy life and create pleasure.

When this happens, you become more passionate about your life because you are thinking on a higher level than you were used to thinking. Hope starts seeping into your thoughts, and you begin to picture more for yourself and your loved ones.

Spend 80% of your time thinking of ways to increase your income and 20% of your time budgeting what you currently have. It is the simplest 80-20 rule of personal finance around and the most productive. Try it for a few months. See if it checks out.

Web Tools To Help You Manage Money

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Fox Television financial expert John R. Quain has specific advice on some of these individual components of a good overall plan to get control of your finances.

Eliminate Debt: To go straight to the heart of the problem, there is a free website, ReadyForZero. It links to your credit cards, loans and bank accounts, totals what you owe and estimates how long it will take to pay off your debts, depending on the interest rate of each account. A sliding bar of what you can pay each month shows dynamically how you can shorten the time to pay off everything, and save money in the process. Even a small extra amount added to monthly payments can make a difference over time. ReadyForZero’s graphs show at-a-glance how you can improve your economic health. The program was originally designed with credit card debt in mind, but it has been expanded to include other types of debt. It includes recommendations for improving your overall financial picture, such as calling credit card companies to arrange different statement dates to accommodate your income pattern.

Pay Bills On Time: Late fees not only cost you dearly, but they can damage your credit rating. Pageonce.com has a mobile application that is designed to keep you on track with payments, according to the site’s COO, Steve Schultz. The company is a “financial nanny,” he said, that warns when payments are due and collects monthly statements into a single, convenient place. The greatest advantage is the ability to pay directly from your Android or iPhone. That’s particularly appealing to those who travel for their business and tend to lose track of payment dates. The fee for the mobile bill-pay feature is $4.99 per month.

Plan ahead: You can get even more support in budget planning, bill notification and financial advice through Mint.com, considered by many to be the most mature app and service online. The software is free and it tracks bills and accounts to give you detailed expense balances. It automatically categorizes certain charges or fees under headings such as “shopping,” “alcohol and bars” or other expenses common to your individual spending patterns. It shows how much cash you have on hand, how much credit card debt and what your cash flow looks like. Mint is available for Android and iPhone handsets and has an extensive website. The software is not, however, integrated with the desktop software of its parent company, Intuit’s Quicken.

Quain suggests hiring a coach if you are serious about getting a handle on debt. That could involve signing up online and sharing details of your financial standing with a third party. If that’s a leap of faith greater than you feel comfortable with, try DebtCoach at Bills.com. The site doesn’t require you to post private account numbers, just the overall data. It may suggest that you seek professional help or simply take steps such as increasing payments, reducing spending and paying off debt early, depending on the depth of your problem. Handling debt is an individual matter. It’s a different problem for a recent college graduate, for instance, than for earners who have a family to support. Look for advice from those who recognize these differences.