Choosing mutual fund investments from the thousands of fund offerings available can be daunting. With so many different categories of funds and fund families, it may make sense to work with your financial advisor. Here are some steps experts recommend you consider when selecting investments.
There are a vast number of mutual fund offerings available to choose from and the process can be intimidating even for a seasoned professional. With so many decisions to make along the way and so many factors to evaluate such as which categories of funds or fund families are right for you, it may be sensible to work with your financial adviser to guide you along the way. Here are some basic guidelines our experts at Paradigm Capital Management suggest to adhere to when selecting investments. Evaluate Your Investment Objectives Before you set out to start picking funds, you first need to step back and design a clear picture of your investment objectives and identify the time frame you have to work with. For example, you may plan to start a business in two years, to invest in your children's education in 10 years, or to fund your retirement in 30 years. Generally speaking, the longer out your goals are, the more time you have to save and invest your money and the greater your tolerance for risk might be. If you have an investment time frame of 10 years or more, you may want to take on more risk so that you can position yourself to potentially earn more over time by investing more aggressively in stocks with good growth prospects. However, if you know your investment objectives, say purchasing a house, are less than five years away and you will need funds to cover your purchase, you may want to allocate your portfolio with more conservative, income-producing securities such as dividend paying stocks or short-term fixed income securities. Try to match your goals with the goals of the fund you choose After you develop and clear understanding of your investment objectives with your financial advisor, the next step is to identify which mutual fund categories and types will most closely match your investment goals, risk tolerance, and time frame. With thousands of mutual funds currently available for investors, there are certainly plenty of options to pick from, whatever your goals are. But don't be overwhelmed by the endless number of funds and differentiation within those funds that are available in the mutual fund industry, because essentially all the funds can be boiled down to a several large groups. So think about your investment objectives and what you need to fill the void with in order to get you there - is it income? Growth? An income-growth combination? - And then match that with the investment objectives of the fund. For instance, stock funds' objectives typically include "aggressive growth," "growth," or "growth and income" depending on the underlying securities they hold. Furthermore, each of those funds can also be categorized by a risk level such as high risk, average risk, or low risk. There are a number of resources available to help you boil down your search for mutual fund objectives and risk levels that are aligned with your financial objectives and risk tolerance in an organized and informed way such as Morningstar, Lipper Analytical Services, Standard & Poor's, and Value Line, along with many other publications. Standard & Poor's, for example, categorizes stock funds into five major categories from which each fund is then categorized by fund investment style, risk level, performance, and by an overall risk-adjusted rating in relation to other funds in the same category. Top Performers Fund prospectuses also let investors know the fund's performance, fees and expenses, and other information that should be carefully scrutinized when choosing mutual funds for your portfolio. Given your unique time frame and appropriate risk level, performance over the specific time period you need along with the appropriate fund risk level is a good measure of how well the stock fund will fit into your portfolio as part of your overall investment strategy. So when you are doing your due diligence, don't get caught up in the fund's latest performance figures solely, but looking at the fund's performance figures over time. A common misconception and often mistake is that of buying the latest "hot" mutual fund. In fact, buying into a fund solely based on its last performance figures can be very risky, because only 39% of domestic equity fund managers beat their benchmark during the recent five year period. So it is not easy to consistently outperform the benchmarks especially when a fund is on a hot streak already. Instead, look at funds that consistently provide above-average investment returns in their category over the past three year, five year, and 10 years periods. Volatilities can give investors a good understanding of how the fund performs in bull markets as well as bear markets. Lower volatility can signal that the fund may do well during good markets but also potentially not do less than the averages in down markets Additionally, compare the annual percentage returns of the fund with its major benchmark index. For example compare a diversified large-cap stock fund with the S & P 500 stock index. Mutual fund performance benchmarks are listed in each quarter in major financial publications through their websites. For more information, consult with Paradigm Capital Management, Inc. Paradigm is a trusted leader in small cap investing. The Paradigm Funds family of no-load mutual funds makes the firm’s small-cap and SMid-cap strategies available to fee-based financial advisers and retirement professionals. Paradigm Funds are widely available on more than 50 no-load platforms. To learn more about how Paradigm Capital Management’s capabilities align with your long-term goals, please contact us at (518) 431-3500 To read more, please visit here: http://paradigmcapitalmanagement.freeblog.site
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When it comes to deciding on secure investments, offshore funds, located outside of one's national boundaries, can serve as valuable opportunities. Offshore funds are a great mechanism to take advantage of some tax benefits. Moreover, offshore funds and trusts are often less restricted by National financial parameters and guidelines. Offshore mutual funds offer lower costs and operating fees because of their reduced regulation requirements. According to Investopedia, offshore funds offer eligible investors significant tax benefits compared to funds in many high-tax jurisdictions. For example, US domestic mutual funds are a tax disadvantage for international investors from outside the U.S. because dividends from these funds are typically subject to the high tax rates the U.S. has for non-citizens. Rates can be as high as 30% on certain types of income paid out by the US domiciled funds. Offshore funds are often managed in a similar way as domestic funds are. Many of these offshore tax-haven locations are considered investor friendly and a thorough investigation will discover which are regarded as financially secure. Although many offshore funds are quite legitimate, there are many that are run as unknown entities and should not be trusted. Never invest in an offshore account located outside of established financial centers. Such offerings may be more susceptible to scams because of relaxed regulations in some offshore locations. Offshore trusts are similar to offshore funds. An offshore trust is very comparable to a traditional trust in that it involves a binding legal agreement (or trust deed) between the trustee, settler, and beneficiary. Trusts are designed to protect assets from undesired parties. Benefits and distributions are made to the stated beneficiaries according to the trust deed. It's true that offshore trusts are generally formed in low-taxation areas such as Switzerland or the Cayman Islands, but decreased taxation is not the only characteristic of a good offshore trust or offshore fund. Many countries simply are home to renowned, experienced trust companies that offer extreme confidentiality and substantial asset shields. Offshore jurisdictions frequently modify their laws to make their jurisdiction attractive to potential investors. An ideal trust location should display proven successful management of trusts. Our experts at Paradigm Capital Management frequently stress that offshore trusts and funds should be incorporated into every investor's asset allocation model. Forming an offshore portfolio can provide protection from untoward scrutiny, litigation, and civil strife. It should be apparent that while the cost of the formation and maintenance of a trust fund may be considered high, the establishment of an offshore trust will provide for sound peace-of-mind for those looking to protect their wealth and provide for their children in the long- term. International banking systems exist which allow you to maintain accounts in different currencies, eliminating the risk of foreign exchange for transactions involving offshore funds. Such institutions may offer the ability to manage an account from anywhere in the world, and they will offer the ability to send funds across continents with no fees. They are not typically prone to interest rate restrictions and reserve requirements common to domestic lenders. For more info you can consult with us at Paradigm Capital Management. With a long history of small-cap investing, Paradigm Capital Management employs a disciplined, bottom-up approach with an emphasis on fundamental analysis and extensive management contact. Our strategies are available through separately managed accounts, mutual funds, and onshore and offshore long/short funds—all of which draw upon the same fundamental research and investment process that have been the key drivers behind our significant, long-term outperformance. To learn more about how Paradigm Capital Management’s capabilities align with your long-term goals, please contact us at (518) 431-3500 Also read here: Having A Diversified Penny Stock Portfolio |
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September 2018
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