How can a bond fund pay interest rate yields of 10% when interest rates are near historical lows? These high yield bond funds invest in lower-quality bonds, sometimes referred to as “junk”. Hence, the term often used to describe these mutual funds is JUNK BOND FUNDS. At the one extreme you have high quality “investment grade” bonds and bond funds. These are issued by entities with very high credit ratings, and the risk of default to investors is low.

At the other extreme you have junk bonds, where the issuer has a poor credit rating and default is a real possibility. If a corporation gets into financial difficulty, for example, it might default and quit paying interest to its bond holders. If things go from bad to real bad for the company, investors may fear that they will default and not be able to pay bond owners back as agreed when the bonds mature.

Either way, risk of default is real, and sends the price or value of a junk bond down. The lower the price of a junk bond, the higher the yield. For example, you buy a bond with a 5% coupon interest rate for $1000. A few years later the bond heads toward junk status and its price declines to $500 in the bond market.

An investor who buys this bond for $500 is betting that the issuer will continue to pay $50 per year in interest. That produces a current yield of 10% to the investor who bought the bond for $500 ($50 divided by $500).

The average investor is not capable of analyzing individual bond issues to find a promising high yield opportunity. Professional money managers who manage bond funds are (hopefully). If you decide to opt for high yield bonds go with a high yield bond fund. Here you will be invested in a diversified portfolio of these bonds, which lowers your risk of default considerably. If a couple bonds out of a portfolio of hundreds go bad, no big deal.

Just remember, there is no free lunch in the investment world. High yield bonds and bond funds involve risk. Their price or value fluctuates, sometimes as much as stock prices do. Their advantage is obvious … high income.

Here are two tips for those of you tempted by these high income investments. First, consider no-load high yield bond funds with low expense ratios. There is no sense in paying a sales charge, or high expenses. This works only to lower your return.

Second, invest in increments rather than in one lump sum. For example, let’s say you want to invest $50,000 into a high yield fund. Start with $10,000 in the high yield bond fund and $40,000 in a money market fund with the same fund company. Then have them set you up so that $1000 to $2000 flows each month from the money fund to your bond fund until all of your money is in the junk bond fund.

Using the above strategy, you lower the risk of investing too much at the wrong time. Plus, your money buys more shares when the fund price is lower. This is called DOLLAR COST AVERAGING, and is an effective investor tool.

A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.

Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com

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That’s their story, and unfortunately they are sticking with it. I suggest you look before you leap. Your idea of conservative might differ from theirs. For example, let’s say that you plan to retire in 5 to 10 years. What percent of your retirement nest egg do you want at risk in the stock market? Or, if you plan to retire in 30 years, what’s your comfort level with owning stocks? How about when you are already retired?

Every mutual fund company has its own way of diversifying assets in these target retirement funds, and you might be surprised when you look at these numbers.

For people a few years away from retirement: anywhere from 30% to as much as 80% of your money could be invested in stocks in a target retirement fund designated as appropriate for you.

If you are young and expect to work another 20 to 35 years, expect 80% to 90% of your assets to be invested in the stock market if you go with the appropriate target date. Example: You plan to retire in about 2040, hopefully a little sooner. You have a 401k plan that offers a Target Retirement 2040 Fund, so you go with it and invest everything there.

If you are retired and had your nest egg in the safest of these funds, called a retirement income fund, why did you lose money between September of 2008 and March of 2009? Take a closer look at your fund’s annual report. You likely had more money invested in stocks than you thought, and the stock market was down about 40% during that time period of just a few months.

In late 2007, some folks getting ready to retire in just 2 or 3 years had their retirement savings in a target retirement 2010 fund, thinking it would be safe. A year and a half later they had lost 30% of their retirement assets.

The mutual fund companies and the investment business in general see things differently than many of their customers do. I spent over 20 years working as a stock broker and financial planner, working directly with the investing public. If clients wanted a high degree of safety, that’s what I gave them. If they were willing to accept a moderate risk, I recommended the appropriate stocks and bonds.

What you need to know about target retirement funds and the investment business in general is that the folks in charge there don’t necessarily think like you and I. I include myself here, because I was routinely scrutinized for disagreeing with management (my sales managers, and their superiors).

In management’s view, most people invest too conservatively; and it’s their job (and mine) as professionals to show folks how to invest to be more aggressive. In other words, they believe that clients (people) should be forced-fed stocks and stock funds whether they like it or not, because it’s for their own good.

Between 1982 and 2000, this way of thinking worked in favor of the clients (investors), because the stock market cooperated and went up the majority of the time. Then, in 2000-2002 the stock market took a beating; and it happened again in 2007-2009.

These are tough times to be an investor if you don’t know how to invest. If you are to succeed financially, you’re going to need knowledge of investments and investing. Target retirement funds are the easy way to go, but look before you leap because most of them involve more risk than first meets the eye.

Once you’ve learned how to invest you might still want to own some of these funds, but you won’t want to bet your entire retirement savings on them. You can tailor your own investment plan, one that suits YOUR comfort level, once you are informed and know how to invest.

A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.

Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com

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Remember, you are just getting your feet wet and don’t want to start with a bad experience. So, here are what I suggest are your best mutual funds to get started with. Your overall risk will be low to moderate.

Your first pick is a no-brainer, a money market fund. These are the safest of all mutual funds and their value or price does not fluctuate. In this investment you simply earn interest in the form of dividends. The amount of interest you earn varies, based on interest rates in the economy.

There should be zero cost to invest in a money market fund, no commissions or sales charges called LOADS. Once you have money invested here, you can move it at will to other funds offered by the fund company (also called a fund family).

Keeping things simple, your other best “starter fund” is called a BALANCED FUND. These funds invest in both stocks and bonds, so risk is generally moderate. These days there are several variations of balanced funds, giving the investor plenty of latitude. There are traditional balanced funds, asset allocation funds, lifecycle funds and target retirement funds.

All balanced funds have a diversified portfolio of stocks and bonds, but they vary in terms of safety, dividends, and growth potential. Basically you can place them into three different risk categories: conservative, moderate, or aggressive. I suggest you go with a balanced fund labeled as moderate in the fund literature you get from the fund company.

Traditional balanced funds have been around for many years and have a moderate asset allocation of about 60% stocks and 40% bonds. This ratio of stocks to bonds remains fairly constant. These traditional funds are generally simply called “balanced funds”, and are a good solid place to invest for the new investor.

If you want to get more conservative or aggressive, I suggest lifecycle funds. For example, an aggressive-growth lifecycle fund would be the riskiest and would be heavily invested in stocks vs. bonds. Dividends would be low to insignificant. On the other hand, a conservative lifecycle fund emphasizes bonds vs. stocks, and hence is safer and pays higher dividends.

For most new investors I suggest a traditional balanced fund, or a lifecycle fund labeled as either moderate-growth or conservative-growth.

With half of your money in a money market fund and half in a balanced fund you won’t get rich quick, but you won’t lose your shirt when things get ugly in the economy either.

Once you learn how to invest and gain in confidence, you can expand your horizons. All three of the fund families mentioned offer a wide array of investment choices. Plus, all three offer funds with no commissions, no sales charges … NO-LOAD. Learn how to invest at your own pace. Until you feel up to speed, just relax and stick with your starter funds.

A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals. Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com

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Of course, like with stocks and other assets not all mutual funds are created equally as there are literally hundreds of available funds. Load mutual funds charge a fee which pays the salary of the board of advisors. The fees typically vary but are usually a small amount so if you earn $100 you might get back $96 after all the fees.

On the other hand, no load mutual funds do not charge a fee to investors and are generally available to anyone. Given today’s economy, are no load mutual funds inferior to those that charge a fee for their services? Any manager that “guarantees” a return on your investment is only out to get your money so be extra careful of those who promise a return.

While there are most definitely those funds that charge a fee that do exceptionally well, the return you can expect to get will be significantly lower once all the fees are factored in. If you are just starting out, then it is suggested to invest in those funds that do not charge a fee. Stable stocks such as from oil and utility companies typically stay consistent and pay out decent dividends.

No load mutual funds are excellent investment vehicles as they allow you to diversify and reduce your risk. Be sure to always do your research ahead of time into a particular fund you are interested in and use resources such as Morningstar to gather further analysis. The last thing you want is following a hot tip that turns out to be a dud because you didn’t do your research.

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Money Market Funds

These are generally categorized as having the lowest risk as these typically consist of Treasury bills and government bonds. While you shouldn’t expect a huge return on your investment, money market funds are ideal for those who are conservative or want to avoid risk altogether. The good thing about these types of funds is that you can expect to get back twice what you would get from a savings account.

Balanced Funds

As you can probably guess by the name, these types of mutual funds invest into different types of assets such as stocks, bonds and other equities. These funds typically consist of 40% fixed income assets with the other 60% invested in equities. These funds are ideal for those investors who want to diversify their risk by investing into different assets while also getting a return on their investment.

Global Fund

Global funds consist of investments around the world and are generally difficult to classify them as being riskier or safer than other types of mutual funds. One thing to note is that depending on the economic climate of the country being invested in, they can be extremely volatile. However, these types of funds are excellent for countries with potential economic growth such as India or China.

Prior to investing, be sure to always do your research while analyzing the benefits and risks of each. You can always practice too by using pretend money and managing a portfolio as if you were really going to invest. Finding the right mutual fund will ultimately depend on what you are most comfortable with.

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Mutual funds have become an industry favorite, because it doesn’t take a great deal of money to get started. A novice investor should spend some time educating himself about current market trends, though. When you purchase mutual funds, you’re buying shares in a company. As longtime investors say, your aim is to maximize your returns while minimizing your risks. Mutual funds certainly offer you the best option as far as being flexible, and they are very fast and easy to sell when that time comes.

In a poll taken by the media, consumers overwhelmingly voted for mutual funds as the best investment, mostly because there is so little risk involved. In recent years, investments in these funds have surpassed national saving certificates and the public provident fund as the best way to save money. Investors also find that they can save on taxes by investing in them.

If you’re new to investing, you will find a great deal of information on the internet that will teach you the best ways to buy and sell funds so that you can save money on your investments and earn maximum profit.

For short-term investments, you can’t beat a higher risk fund. You can find funds which have won performance awards, but check them out thoroughly to make sure they fit into your investment plans before investing. As mentioned earlier, you can find a ton of helpful information regarding mutual funds just by researching on the internet.

If you’re looking to save tax dollars by investing in mutual funds, you’ll want to manage your funds carefully and keep track of what’s going on in the market. If you don’t know which funds are the best investments for you, you can always go to a broker for assistance.

It’s getting harder to make ends meet in the world today, but you can make it easier by investing in the right funds. By having a cushion in the low-risk mutual fund market, you’ll be able to weather the blows life throws at you with a great deal less stress.

If you’re worried about your retirement years or paying for your child’s education, you’ll find help in mutual funds. In fact, you can make enough by investing in these funds to make your whole life much easier to live. With mutual funds, instead of you having to work for the money, it works for you.

Invest your time wisely and visit MutualFundPlanning.com for more tips on mutual fund newsletters and mutual fund advice and improve your portfolio today.

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Since January 2008 ING Direct has been offering Canadians their own brand of mutual funds which they have chosen to call “Streetwise” Mutual funds.  It is my opinion this new portfolio of funds has brought Canadians a great investment opportunity that has not yet been available. In this article I hope to resolve the following questions:

• What are Streetwise Mutual Funds?
• How do they differ from other fund offerings?
• Most importantly, how are they my best investment choice?

What is a Streetwise Mutual Fund?They are is one of three mutual funds currently offered by ING Direct Canada.  These funds invest exclusively in market indexes; specifically Canadian Bonds (DEX Universe Bond Index), the Canadian market (S&P/TSX 60), the US market (S&P 500) and International Stocks (Morgan Stanley Capital Inc. EAFE).

As stated there are three funds Income, Balanced, and Growth each having progressively higher risk then the previous with correspondingly potentially higher returns.  One way of thinking of it is the closer you are to when you plan on spending the money the less risk you want to take.  So if you were planing on spending the investment in the next few years you’d probably want to invest in the Income Fund, or if your time line was more like 20 to 30 years away you’d probably consider the Growth Fund.  This of course leaving the Balanced one somewhere in between.  Note that there are many other factors to selecting your level of acceptable risk and this only takes one into account.

How do they differ from other fund offerings?

Many other banks and fund companies also offer index funds this is true.  The two biggest advantages that most advocates of index funds are as follows:

• Index funds have historical performed better then managed funds
• They have lower management fees then managed funds so you keep more of the income

What this means is that the choice for the average person to invest in mutual should more or less be a no brainer and that they should choose to invest exclusively in Index Funds.  However, you still would want to get proper expose to the various markets.  This is where the Streetwise Funds come in not only do they invest in Indexes they already invest in several so you don’t have to buy a bunch of different ones.Most importantly, how are they my best investment choice?

As stated already not only are Street wise funds invested solely in indexes they also invest in various different indexes.  The degree that each of the three funds invest in each index is continuously maintain meaning that once you start investing in one of these funds you don’t have to do anything unless you decide that you want to change you level of risk (ie buy into a different fund).

On top of this ING has put a cap on the management expense ration (MER) to 1% (which at the time of writing was actually 0.8%)  this amount is actually as good or better then what is being offered by most other index funds that invest in only one index.

To my knowledge the only other good option are TD e-series or iShares ETF.

The TD e-series portfolio offers basically the same option as the ING Streetwise funds, however they’re MER is a bit higher so your returns would likely be lower.  But if you want the convenience of dealing with a major bank and possibly a better online banking system, you might decide on it instead.

As for iShares they do not actually offer mutual funds but rather what are called ETF (Exchange Traded Funds) which is a fancy way of say you buy mutual funds through the stock market.  It is more work to buy them and you can only invest in one index at a time but at an MER of around 0.17% it could be worth the work.

Martin Harford is a happy customer of ING Direct Canada and is offering you the chance to use his Orange Key “16157624S1″. By simply entering this number in when signing up with ING Direct Canada you will receive $25 within 24hrs of opening an account with a balance of $100.

For more information see his blog at: http://ingdirectorangekey.wordpress.com/orange-key/

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They are the leading provider in the United Kingdom of tax-exempt savings plans, child trust funds and over fifties life insurance. Engage Mutual Funds Limited is dedicated to the provision of value for money products that are simple and easily accessible. Products are designed to enhance the welfare of people.

Engage partners with Park Row Associates and SimplyBiz in the Independent Financial Advisor market and delivers an excellent level if support to meet their needs.

Engage received the Investor in People award in 2001 and have kept up this standard ever since and in 2006 their employees received a gold award for charitable contributions through their “give as you earn” scheme.

The Engage child savings and investment solutions include two schemes, the “Engage Child Trust Fund” and the “Junior Easy Save”. Both of these are affordable investment and savings options.

The Engage Child Trust Fund allows your child’s savings to benefit from the latent growth of stock market based investments; this is a Stakeholder account. Features of this account include:

• No hidden charges, just one simple, annual management fee of 1.5% guaranteed for the lifetime of the account.
• Acceptance of deposits from as low as £5 and various savings methods. Child trust funds are generally set at a minimum of £10.
• The potential for Stock Market growth, engage Child Trust Fund invests in a variety of shares with different companies, this spread of investment provides reduced risk as well as taking advantage of the potential growth of stock market investments.
• The option for “lifestyling” which means if you select this option, the money will be moved gradually, at age 13 of the child, from medium to high then low risk and back again, until the child reaches the age of 17 years when the money is switched over completely.

Every child who is a UK resident and was born on or after 1 September 2002, and for whom a child benefit is being claimed, is entitled to receive from the Government a £250 Child Trust Fund voucher, this increases to £500 for lower income families. On the 7th birthday of the child another payment is made into the Child Trust Fund, again £250 or £500 dependent upon the income of the family.

Engage is the UK’s leading Child Trust Fund providers and they are committed to help you with any and all the information required to set up a Child Thrust Fund. They invest in stocks and shares in a range of companies listed with the FTSE 100, with the aim of achieving long term capital growth, whilst spreading the risk.

Once a contribution has been made into the Child Trust Fund, it is owned by the child and stays in the same account until the child reaches age eighteen, thereafter the funds belong to that child.

Invest your time wisely and visit MutualFundPlanning.com for more tips on how do mutual funds work and fund selection tips and improve your portfolio today.

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They discovered that a $300,000 loan would cost them around $500 per week to service. That means that payments of around $500 would be made to the bank which would cover the cost of the loan and some repayment of the loan. This did not excite them at all.

They thought this was too expensive for them and they wisely decided that they were going to keep saving for their home deposit for the next three years.

They made this decision because the rent on this home that they wanted to own, which they were already renting was within their modest incomes. It was also a modern design and was warm, with good neighbors too.

One day Craig and Jenny read an interesting statement. It was one that really made them sit up and take note. It really caught their attention…

They read, “If today I asked you to save $170 per month for your retirement, you’d say, “No we can’t afford it”. So what if someone invited you to save for your house for the next three years, and the Government paid you (as a couple) $170 per month for your retirement as well?”

What the article was driving at was that the New Zealand Government will pay about $86 each per month to them as a couple while they saved for their home using KiwiSaver. Do you think that Craig and Jenny liked that?

How many people know that they loved it? I’m guessing you would too. The New Zealand Government also thinks so. That is why the government added the home ownership aspect to the KiwiSaver scheme.

Every New Zealand resident that has never owned a home can take advantage of this plan with KiwiSaver. To qualify, you need to be resident and contributing to KiwiSaver for the savings time frame of at least 3 years.

You also need to be willing to wait out the three full years before you buy any home. After this time frame has passed your own contributions and those of your employer can be drawn out for your first owner occupied home deposit.

Craig and Jenny, like many young New Zealand couples will both pull out their money from the KiwiSaver scheme and both move into their jointly owned first home. This will be their owner occupied residential home. That is stating the obvious, but it is an important fact to note.

This articles is supplied as an information service. While every care has been taken to supply accurate information at the time of writing the article, errors and omissions may occur.

Accordingly Life Risk Limited accepts no responsibility for any loss caused as a a result of any person relying on the information supplied. Please seek out individual, specific advice.

A disclosure statement is available, upon request and free of charge.

Life Risk|KiwiSaver|KiwiSaver Advice

Neil Smith is a Financial Adviser in New Zealand for New Zealand residents. His advice helps business owners, professionals and families to get the most out of KiwiSaver.

htttp://www.LifeRisk.co.nz/kiwisaver.html or http://www.twitter.com/mykiwisaver

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In this article, I’m going to introduce you to the source of problems in today’s mutual fund industry. The place I’ll start is someplace that you may not think is connected, but it is. I’m referring to a speech that was given on January 17, 1961. President Dwight D. Eisenhower had been running our country, and this was his farewell address to the country. This was a pretty dramatic moment. He had nothing to lose, no political office or fundraising to worry about. It was a moment of truth. Here, almost 50 years later, his speech is still remembered. It was really striking at the time.

He was warning us of a rising problem that he called the “military industrial complex.” As a former general of the US Army, he really had a front row seat to the workings of the military. And then, of course, he was not a general but also Commander-in-Chief for eight years. From his front-row seat, he watched the massive buildup this country was undergoing in regards to the industrial complex. He talked about how this sector was intrinsically prone to moral hazard.

If you don’t know what “moral hazard” means, it’s when someone is protected from the risk or downside of his or her own actions. In other words, there is no negative consequence to their self-serving actions. As you might imagine, this can lead to very risky practices. This is true not only in the military or industrial military world, but also in the financial world.

Given Eisenhower’s background, many people were stunned that he specifically used that term, “moral hazard,” or even talked about this as a problem at all. He also described about how the military-industrial complex was prone to what is called “principal agent” problems. That’s when the person you hire to help or protect you is more aligned with his or her own self-interests than yours. It’s also a nice way of saying crooked. All this sounds familiar when you consider what has been going on at Wall Street and the financial world.

The third term he used was “rent seeking.” That’s when you hire someone who then makes money unfairly by manipulating the system he is operating in. This amounts to lying so skillfully that almost everyone buys it. Even the liar may come to believe it. Even so, it’s still a lie.

President Eisenhower saw this happening in the 1950’s, and he was quite concerned about it. This is also a very good description of what’s been going on in the U.S. since the 1980’s.

Now, in general terms, Eisenhower was talking about defense contractors when he talked about the military- industrial complex. But in a broader sense, he was also talking about the Pentagon, the Congress and the Executive branch. It’s very similar to what’s going on today, a kind of “industrial-investment complex.” In the 1950’s, 1960’s, and 1970’s, the industrial-military complex was putting the US at risk of collapse. And in the 1980’s, 1990’s, and 2000’s, it’s the industrial-investment complex that is more dangerous to the stability and safety of this country. The industrial-investment complex is not only Wall Street, but also credit card companies, banking companies, insurance companies, Congress and the Executive branch. They’re all in on it. The SEC, the Commodities Futures Trading Commission, the Treasury and the Fed are all involved here. No one wants to admit it, but they’re all systematically part of the problem.

If you are serious about making your money grow, then you have to understand how this complex works against you. It’s not so much a conspiracy as a powerful force that moves against your wealth.

How the problems we heard about from Eisenhower were repeated is another topic, but we didn’t learn from them. So we continued the pattern of greed and deception, and that laid the groundwork for where we are today. The conventional methods, ideas, and approach to wealth are crumbling. The status quo is rapidly changing. You have to ask yourself which side of the bursting bubble you want to be on, because there are always two sides.

RC Peck, CFP®
Registered Investment Advisor, Founder of Fearless Wealth
Investment Education for Successful Professionals.

http://www.fearlesswealth.com

With over 20 years of investment success, RC Peck is a Certified Financial Planner, Registered Investment Advisor, and an NLP Practitioner, which means he knows what you should do to grow your money and how to get you to do it.

RC has recently released a special report called, “29 Minutes to Investment success,” which outlines “One Tool” that causes mutual fund managers to tremble and stockbrokers to weep with fear.

Discover how the “One Tool” can revolutionize your investments today. Click here to get the “One Tool” http://www.TheStockMarketStrategy.com

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