Lessons From The Intelligent Investor Plr Ebook

Table Of Contents

Forward

Chapter 1: Why Are You Investing

Chapter 2: Reasons Not To Invest

Chapter 3: Decide What’s Right For You

Chapter 4: Mutual Funds

Chapter 5: Taxes

Chapter 6: Correct Mindset

Chapter 7: Real Estate

Wrapping Up

Sample Content Preview

Chapter 4: Mutual Funds

Synopsis

Individuals invest in mutual funds for four fundamental reasons: professional management, diversification, convenience, and marketability. The following section outlines these advantages, which make mutual funds most attractive when capital markets are remarkably volatile.

When Te Economy Is Bad

Professional management

Mutual funds provide professional management of your cash. These managers have the training and resources to stay abreast of and adjust to market alterations. Regrettably, fund managers don’t have a crystal ball presenting them the ability to foresee the future; don’t expect your manager to keep you totally out of harm’s way.

Fund managers are demanded by law to select and manage fund holdings in accordance with the fund’s investment objectives and policies, as described in the fund’s prospectus. These objectives might be designed to minimize your risk.

Diversification: dispersing the risk

Mutual funds help do away with some of the risk involved in investing in individual stocks and bonds by giving you shares in a lot of different assets. Remember Enron or MCI? How did that work out for employees who based their futures on company stock? Mutual funds likewise bring down your cost of diversifying by sharing transaction costs with additional shareholders.

Although each mutual fund purchases many securities, the funds themselves come in a wide assortment of styles and classifications. Some mutual funds specialize in growth, some in worth. Some invest in U.S. markets, others in foreign markets. A few invest only in bonds, others in a blend of stocks and bonds. A well-diversified portfolio invests across many styles and sorts of mutual funds.

Read the prospectus summary and annual report. Occasionally the titles of mutual funds may be misleading. A fund with the word growth in its title doesn’t have to be totally invested in growth stocks. Likewise, your mutual fund manager’s investment style may drift, particularly in turbulent markets.

Convenience

The convenience of mutual funds starts with the initial buy and continues with investments, withdrawals, reinvestment of dividends and capital gains, record keeping, and tax reporting. Mutual funds make it simple and inexpensive to dollar-cost average (invest regular sums of money at regular intervals). This strategy is particularly beneficial when markets are extremely volatile — you wind up purchasing more shares when costs are low. You are able to generally find everything you need to read, see, or do at a fund’s site; otherwise, call the fund company.

Marketability

Marketability means you are able to easily purchase or sell mutual fund shares. Unlike owning a home, you might be able to quickly exchange shares in a mutual fund for a different investment or cash. Marketability gives you the flexibility to produce and maintain a diversified portfolio.

Chapter 5: Taxes

Synopsis

Online investors are unlikely to have tax consultants on retainer, so they have to know how picking the right sort of account may lower their tax bills. Brokerage accounts may all seem the same; after all, they’re simply holding tanks for investments. Different sorts of brokerage accounts, though, look really different to the government.

Thanks to the unbelievable complexity of the tax code, you are able to use three main sorts of accounts to hold your investments: taxable, retirement, and education savings accounts.

Know What’s Available

Investing in taxable accounts

Taxable accounts are really liquid, meaning that you are able to easily access the cash without paying special penalties. But that flexibility comes at a cost: taxes. Once stocks you own in taxable accounts go up, or appreciate, and you sell them, you owe capital gains taxes on your profits that tax year. And if the stocks issue you hard cash payments, you owe tax on those, also.

If taxes are your primary concern with investing, consult with books on the matter or with a tax professional person.

When you trade a stock held in a taxable account that has appreciated in worth, you commonly have taxes to pay. Usually, such capital gains taxes are calculated based on how long you owned the stock. There are 2 holding periods:

Short-run: That’s the type of capital gain you have if you trade a stock after owning it for one year or less. You wish to avoid these gains if you are able to because you’re taxed at the ordinary income tax rate.

Long-run: That’s the sort of capital gain result you get if you sell a stock after holding it for more than one year. These gains qualify for a particular discount on taxes.

If you’re interested in cutting back your tax bill in a taxable account, you wish to reduce, as much as possible, the number of stocks you sell that you’ve owned for only a year or less because they’re taxed at your average income tax levels.

Placing your money in retirement accounts

Retirement is among the largest and most intimidating matters you must save for.

The silver lining is that special retirement accounts make saving easier:

401(k)s are commonly retirement plans sponsored by a company. Frequently the company matches the employee’s contributions. 401(k) plans let you delay when you must pay taxes on your contributions and investment gains.