Financial Investing

Archive for August, 2009

When you are undertaking early retirement planning, make sure you are not just retiring to get away from work. You should be retiring to something…there is a big difference in the two.

Do not fall into the trap of retiring to do nothing. Your retirement will not be any different than work. You need to set and work toward retirement goals.

For instance, you and your spouse should both make a list of things you never want to do again and another list of what you want to accomplish in retirement. Not working is not a definable goal. Why both of you? You may be surprised if the two lists do not look remotely the same. Better to find out now the differences, and agreements, and come up with a compromise list. This can be an eye-opening experience…just do it.

Without clearly defined goals for retirement, you may end up becoming a couch potato…that may sound great, but you know it is unhealthy. Your first retirement goal should be to be retired for a long time.

Be specific about what you do not want to do anymore. If you really despise raking the leaves…the desert or a condo, where exterior maintenance is done for you, may be where you look to retire. If you want to golf a lot…you should scratch off Alaska. Be honest with yourself.

The more defined your goals for retirement the busier, healthier and happier you will be in retirement. If you want to learn Spanish, set some measurable goals, and go for it. Just purchasing the language software is not enough.

A mutual funds is a collection of stocks and bonds that are combined into a pool, which are purchased and sold. By pooling these investments you are risk managing the losses that some stocks or bonds may have with gains made by others. This is basically protecting you from having all your eggs in one basket, which is a high risk strategy.

Mutual fund managers have the responsibility to manage a mutual fund. When you invest into these funds you are buying a part of the stocks and or bonds that an investment has been made in. Due to the size of these funds, your investment will only form a small percentage of the overall size of the investment. The decision on what stocks or bonds that the mutual fund buys and sells is determined by the manager. These managers charge a commission and sales fees which you will have to pay for. The structure of these mutual funds often falls within four categories. When you pay a fee at the beginning, this is called a front up.

A back end is when you pay when the shares or bonds are sold. When there is a payment of a fee on a regular cycle, like the annual fee, it is usually based on a fixed percentage of the fund’s net assets. The final type of fee is the best one of all, it is the payment of no fee at all and is commonly called the no load. Obviously this is a good one to shop around for and to select if the fund also has a good track record of providing good returns. There is a choice of the types of funds to invest in. There are the standard stock funds that are issued by companies. The bonds funds are just that, the purchasing of issued bonds. Sector funds are target at specific parts of the economy, such as financial, industrials, mining and the like. International and global funds are as the name indicates, investments made outside of the United States. Balanced funds enable the selection of stocks and bonds, which is a more risk adverse approach. Index funds are aligned to stocks of a particular type of stock indexes.