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TECHNIQUES OF INVESTING

FIVE STEPS TOA PERFECT PORTFOLIO

* First, you really have to understand your current portfolio.

* Second, you have to address the problems in your portfolio, including the
sale of weak investments.

* Third, you need to reach beyond the familiar stock and fund names.

* Fourth, you have to stop paying too much in taxes.

* Finally, you must monitor aggressively.

SEVEN SINS OF INVESTING FUNDS

• See the importance of and learn how to develop a sound investing plan.

•Learn how to better assess risk and diversify your portfolio.

•Gain from ways to develop a miserly approach to expenses.

•Master our new Fiduciary Grade and learn how to recognize truly independent
oversight.

•Harden your resistance to the siren song of trendy funds.

•Improve your ability to uncover tax-efficient funds.

•Develop techniques for monitoring and rebalancing your portfolio.

STOCK PICKING TECHNIQUES

Spot the right time to move contrary to the crowd.

•Find companies with wide economic moats. These are the competitive
powerhouses in their industries.

•Master the concept of Margin of Safety so your investment is never a gamble
and you're always protected.

•Know the smart move when you can't find a fat pitch stock.

•Understand compounding and how it will increase your profits over time.

Mutual Funds

A mutual fund is a type of investment vehicle where investors pool their money in order to allow each investor participate in a portfolio of securities. The individual investor doesn't actually own each security but instead, he owns shares of the mutual fund. The main benefit of a mutual fund is that it provides a way for the investor to achieve diversification in his investments without having to invest a a lot of money.

The first mutual fund was the Massachusetts Investors Trust introduced in 1924. At the end of it's first year, the fund had 200 investors with $63,600 in assets. At the end of 1995, the fund grew to 73,500 investors with assets totalling $1.8 billion! Now there are over 7000 different mutual funds available for you to choose from.

You may be wondering why you should choose a mutual fund. Simple - a mutual fund offers 2 large benefits over owning the stocks individually. Those benefits are diversification with professional management without having to invest a lot of money.

Diversification is important because it helps to reduce the risk. By owning shares of multiple companies, the fund's share value is not devastated if an individual company has a poor performance.

Selecting which securities to buy, the allocation of cash and securities, and when to purchase is all done by the fund manager or the management team. The fund manager has the training, time and the resources to make the best informed investment decisions.

Also, he fund may be part of a family of funds where the investor can switch between funds at no additional cost, including switching in and out of a money market funds. Most mutual funds include some degree of check writing privileges and may offer automatic transfer of funds on a periodic basis like monthly for those who want to regularly invest a set dollar amount. This type of investment is called dollar cost averaging.

How to Select a Mutual Fund

Unfortunately, there's no one size fits all strategy when it comes to any type of investing. You need to take into consideration what your needs are and what your future financial goals are. Everyone's situation is unique. We encourage you to talk with your financial advisor to find out which mutual funds would best complement your portfolio. When choosing a mutual fund you should first get a prospectus then, call the fund company. In many cases, the prospectus is available right on the company's website. Also, Morningstar rates mutual funds. Each year end, many financial publications list the year's best performing mutual funds. Naturally, very eager investors will rush out to purchase shares of last year's top performers. That's a big mistake. Remember, changing market conditions make it rare that last year's top performer repeats that ranking for the current year. Mutual fund investors would be well advised to consider the fund prospectus, the fund manager, and the current market conditions. Never rely on last year's top performers.

The Prospectus

A prospectus for a mutual fund is a publication that has all the information that is required by the Securities Exchange Commission (SEC). The funds propectus includes objectives and policies, roles, services, fees, and major features of the fund.The prospectus also defines the boundaries within which the fund manager can operate. Using a hypothetical example, we will assume that the prospectus of the Chicken Farms Mutual Fund says "the fund will only invest in chicken farms in the USA that have shown a profit for at least the last two years." The fund manager would have the freedom to buy stock in any chicken farm meeting that criteria. However, the fund could not buy any chicken farm shares anywhere else other than the US.

Costs of Mutual Funds

Usually, mutual funds are offered with several classes of shares, or they are no-load funds. Mutual fund companies exist to make money.

That money can come from many different sources:

A sales charge: incurred upon purchase of shares

A deferred sales charge: incurred upon the sale of shares

Management fees: an on going operating cost

Distribution fees: on-going costs usually associated with advertising

Trading costs: costs charged by the broker for executing trades within the fund.
These can be high in funds that have high turnover rates.

Other expenses: another category for on going expenses.