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Eric Tyson. Mutual Funds For Dummies
Praise for Eric Tyson’s Mutual Funds For Dummies®
Mutual Funds For Dummies® To view this book's Cheat Sheet, simply go to www.dummies.com and search for “Mutual Funds For Dummies Cheat Sheet” in the Search box. Table of Contents
List of Tables
List of Illustrations
Guide
Pages
Introduction
What’s New in This Edition
How This Book Is Different
Foolish Assumptions
Icons Used in This Book
Beyond the Book
Where to Go from Here
Getting Started with Funds
Making More Money, Taking Less Risk
Introducing Mutual Funds and Exchange-Traded Funds
Making Sense of Investments
Lending investments: Interest on your money
Ownership investments: More potential profit (and risk)
Surveying the Major Investment Options
Savings and money market accounts
Bonds
Stocks
Overseas/international investments
Real estate
Gold, silver, currencies, and the like
Annuities
Life insurance
Limited partnerships
Reviewing Important Investing Concepts
Getting a return: Why you invest
Measuring risks: Investment volatility
Diversifying: A smart way to reduce risk
Fund Pros and Cons
Getting a Grip on Funds
Financial intermediaries
Open-end versus closed-end funds
Opting for Mutual Funds
Fund managers’ expertise
A (BRIEF) HISTORY OF MUTUAL FUNDS
Funds save you money and time
Fund diversification minimizes your risk
Funds undergo regulatory scrutiny
You choose your risk level
Fund risk of bankruptcy is nil
Funds save you from sales sharks
You have convenient access to your money
DON’T FRET ABOUT THE CROOKS
Addressing the Drawbacks
Don’t worry about these …
Watch out for these …
Funding Your Goals and Dreams
Acting Before Researching: The Story of Justine and Max
Lining Up Your Ducks Before You Invest
Pay off your consumer debts
Review your insurance coverage
Figure out your financial goals
Determine how much you’re saving
Examine your spending and income
Maximize tax-deferred retirement account savings
PRIORITIZING YOUR FINANCIAL GOALS
Determine your tax bracket
Assess the risk you’re comfortable with
Review current investment holdings
Consider other “investment” possibilities
Reaching Your Goals with Funds
The financial pillow — an emergency reserve
LOOKING AT HIGH-RISK FUNDS
The golden egg — investing for retirement
401(k) plans
403(b) plans
Small business plans
Individual Retirement Accounts (IRAs)
The white picket fence — saving for a home
The ivory tower — saving for college and higher education
Saving in your own name
Using mutual funds for college expenses
Evaluating Alternatives to Funds
Selecting Your Own Stocks and Bonds
Deciding to Choose Your Own Stocks and Bonds
Beware the claims of stock-picking gurus
REGULATORS WEIGH IN REGARDING INVESTING RULE BREAKERS
STOCK PICKING WITH JIM CRAMER
Know the drawbacks of investing in individual securities
Understand the psychology of selecting stocks
Picking Your Own Stocks and Bonds
SHOULD YOU JOIN AN INVESTMENT CLUB?
Exchange-Traded Funds and Other Fund Lookalikes
Understanding Exchange-Traded Funds
Understanding ETF advantages
Eyeing ETF drawbacks
Seeing the pros and cons of trading ETFs
Identifying the best ETFs
BEWARE OF “FINANCIAL ADVISORS” IN LOVE WITH ETFs
Mimicking Closed-End Funds: Unit Investment Trusts
Customizing Your Own Funds Online
Hedge Funds and Other Managed Options
Hedge Funds: Extremes of Costs and Risks
Getting the truth about hedge funds
Hedge funds have a much higher risk than mutual funds
Hedge funds have much higher fees than mutual funds
Hedge funds aren’t subject to the same regulatory scrutiny
Hedge funds have lower returns compared to mutual funds
Investigating hedge funds
Read all the important documents
Understand how a fund’s assets are valued
Ask about fees
Understand any limitations on redeeming your shares
Research the backgrounds of hedge fund managers
Don’t be afraid to ask questions
Managed Accounts with Hefty Fees
Private Money Managers: One-on-One
Robo-Advisors: Automated Investment
Separating the Best from the Rest
Finding the Best Funds
Evaluating Gain-Eating Costs
Losing the load: Say no to commissions
Refuting myths about loads
HIDDEN LOADS IN ALPHABET SOUP: ABCD SHARES
Exposing loads
Considering a fund’s operating expenses
Weighing Performance and Risk
Star today, also-ran tomorrow
CGM Focus
Fidelity Growth Strategies
Van Wagoner Emerging Growth fund
Apples to apples: Comparing performance numbers
Recognizing Manager Expertise
Using Fund Publications
Reading Prospectuses — the Important Stuff, Anyway
Cover page
Fund profile
Fund management and other fund information
Investment objectives and risks
Investment advisor
Financial highlights
Reviewing Annual Reports
Introduction and performance discussion
Investment advisor’s thoughts
Performance and its components
Investment holdings
Investigating the Statement of Additional Information (SAI)
Buying Funds from the Best Firms
Finding the Best Buys
The Vanguard Group
VANGUARD’S ROOTS: THE BOGLE DIFFERENCE
Fidelity Investments
Dodge & Cox
Oakmark
FUNDS WITH BRANCH OFFICES: EVEN BETTER?
T. Rowe Price
TIAA
USAA
Other fund companies
Discount Brokers: Mutual Fund Supermarkets
Buying direct versus discount brokers
Why to buy funds direct
Why to buy through a discount broker
Debunking “No Transaction Fee” funds
Using the best discount brokers
Places to Pass By
Hiring an Advisor: The Good, Bad, and Ugly
The wrong reason to hire an advisor
The right reasons to hire an advisor
Beware of conflicts of interest
Your best options for help
If you seek a salesperson
Protect yourself
Make sure you get the best funds
Crafting Your Fund Portfolio
Perfecting a Fund Portfolio
Asset Allocation: An Investment Recipe
Allocating to reduce your risks
Looking toward your time horizon
Short-term goals
Retirement and other long-term goals
Factoring in your investment personality
Divvying up your stocks between home and abroad
Higher education savings goals
Taxes: It’s What You Keep That Matters
Fitting funds to your tax bracket
Understanding ordinary (marginal) income tax rates
Lower tax rates on stock dividends and long-term capital gains
Minimizing your taxes on funds
Use tax-free money market and bond funds
Invest in tax-friendly stock funds
Watch the calendar
Fund-Investing Strategies
Market timing versus buy-and-hold investing
Active versus index fund managers
Putting Your Plans into Action
Determining how many funds and families to use
Matching fund allocation to your asset allocation
Allocating when you don’t have much to allocate
Investing large amounts: To lump or to average?
Sorting through your existing investments
Money Market Funds: Beating the Bank
Money Market Funds 101
Comparing money funds with bank accounts
HOW BANKS GET AWAY WITH PAYING LESS
Finding uses for money funds
Refuting common concerns
SHOULD YOU INVEST SPARE CASH IN CRYPTOCURRENCIES?
I won’t have FDIC insurance
THE ONE YEAR MONEY MARKET FUNDS HAD INSURANCE
WHEN THE BANK OR CREDIT UNION MAY BE BETTER
The check may get lost or stolen
I may have trouble accessing my money
Grasping what money market funds invest in
Commercial paper
Certificates of deposit
Government debt
Other types of securities
Choosing a Great Money Market Fund
MONEY MARKET FUNDS 20 PERCENT OFF!
Understanding why yield and expenses go hand in hand
Looking at your tax situation
DETERMINING WHETHER TAX-FREE MONEY MARKET FUNDS NET YOU MORE
Deciding where you want your home base
Keeping your investments close to home
Considering other issues
Finding the Recommended Funds
Taxable money market funds
U.S. Treasury money market funds
UNDERSTANDING DISCOUNT BROKERAGE MONEY MARKET FUND OPTIONS
Municipal tax-free money market funds
Bond Funds: When Boring Is Best
Understanding Bonds
Sizing Up a Bond Fund’s Personality
Maturity: Counting the years until you get your principal back
Duration: Measuring interest rate risk
Credit quality: Determining whether bonds will pay you back
Issuer: Knowing who you’re lending to
Management: Considering the passive or active type
Inflation-indexed Treasury bonds
Investing in Bond Funds
Why you may (and may not) want to invest in bond funds
How to pick a bond fund with an outcome you can enjoy
Don’t overemphasize past performance
AREN’T HIGHER INTEREST RATES BETTER IF YOU NEED INCOME?
Be careful with yield quotes
Do focus on costs
HOW BOND FUNDS CALCULATE THEIR YIELDS
How to obtain tax-free income
Eyeing Recommended Bond Funds
Short-term bond funds
Taxable short-term bond funds
U.S. Treasury short-term bond funds
EVEN LOWER FEES: HIGH-BALANCE FUNDS AND EXCHANGE-TRADED FUNDS
Municipal tax-free short-term bond funds
Intermediate-term bond funds
Taxable intermediate-term bond funds
U.S. Treasury intermediate-term bond funds
Municipal tax-free intermediate-term bond funds
Long-term bond funds
Taxable long-term bond funds
U.S. Treasury long-term bond funds
Municipal tax-free long-term bond funds
Exploring Alternatives to Bond Funds
Certificates of deposit
Individual bonds
Guaranteed-investment contracts
Mortgages
Stock Funds: Meeting Your Longer Term Needs
Seeing Your Money Grow
Be patient
Add regularly to your stock investments
Using Funds to Invest in Stocks
Reducing risk and increasing returns
Making money: How funds do it
Seeing your stock fund choices
WHAT DO ALL THOSE OTHER NAMES MEAN?
The Best Stock Funds
Mixing it up: Recommended hybrid funds
Vanguard Wellesley Income
A TAX-FRIENDLY HYBRID
Vanguard’s funds of funds
Dodge & Cox Balanced
Vanguard Wellington
Fidelity Puritan
Fidelity’s Freedom funds of funds
T. Rowe Price offerings
Letting computers do the heavy lifting: Recommended index funds
Keeping it local: Recommended U.S.-focused stock funds
Dodge & Cox Stock
TAXES ON STOCK FUNDS
Fidelity Low-Priced Stock
Harbor Capital Appreciation Institutional
Vanguard Primecap
Vanguard Strategic Equity
Being worldly: Recommended international funds
Vanguard International Growth
Dodge & Cox International Stock
Tweedy, Browne International Value
iShares Currency Hedged MSCI EAFE ETF
Expanding your horizon: Recommended global stock funds
Dodge & Cox Global
Oakmark Global
T. Rowe Price Spectrum Diversified Equity
Vanguard Global Equity
Specialty Funds
Sector Funds: Should You or Shouldn’t You Invest in Them?
Landlording Made Easy: Real Estate Investment Trust (REIT) Funds
Profiting from What Everyone Needs: Utility Funds
Factor Investing and Factor Funds
Arming for Armageddon: Precious Metals Funds
Crypto Funds: Pathway to Digital Riches?
From Energy to Metals: Clarifying Commodity Funds
Hedging: Market Neutral (Long-Short) Funds
Matching Values to Investments: ESG Funds
Evil is in the eye of the beholder
Ways to express your social concerns
Working It Out: Sample Portfolios
Getting Started
Starting from square one: Melinda
Silencing student loans: Saanvi, the student
GETTING STARTED WITH LESS TO INVEST
Living month to month with debt: Mobile Marcos
Competing goals: Gina and George
INVESTING MONEY IN COMPANY-SPONSORED RETIREMENT PLANS
Wanting lots and lotsa money: Pat and Chris
Changing Goals and Starting Over
Funding education: The Lees
Rolling over (but not playing dead): Rafaella
Wishing for higher interest rates: Nell, the near-retiree
Lovin’ retirement: Noel and Patricia
THE DREADED D’S: DOWNSIZING, DIVORCE, DISABILITY, AND DEATH
Dealing with a Mountain of Moola
He’s in the money: Cash-rich Carlos
Inheritances: Loaded Liz
Getting Unstuck
Applications, Transfers, and Other Useful Forms
Taking the Nonretirement Account Route
Filling in the blanks: Application basics
Account registration
Your personal information
Your investment
Your method of payment
Dividend and capital gains payment options
Wiring and automatic investment options
Check-writing option
OPENING MULTIPLE FUND ACCOUNTS QUICKLY
Buying into brokerage accounts
Borrowing money so you can invest: Margin accounts
Getting personal
Accessing your cash: Checks and debit cards
Transferring investments into a new brokerage account
INFORMATION ABOUT YOUR (NEW) BROKERAGE ACCOUNT
INFORMATION ABOUT THE ACCOUNT YOU’RE TRANSFERRING
BROKERAGE ACCOUNT TRANSFERS
MUTUAL FUND TRANSFER FORMS
BANK, SAVINGS AND LOAN, OR CREDIT UNION TRANSFERS
ATTACH YOUR ACCOUNT STATEMENT!
Preparing for Leisure: Retirement Accounts
Retirement account applications
Register for an account
Choose your investment method
Select your account service options
Designate your beneficiaries
SEP-IRA APPLICATIONS FOR THE SELF-EMPLOYED AND SMALL-BUSINESS OWNER
What to do before transferring accounts
Filling out transfer forms
ESTABLISHING RETIREMENT ACCOUNTS QUICKLY
Account ownership and address
Where the retirement account funds will be invested
Account being transferred
Authorization to transfer your account
Investing on Autopilot
Finding Help for an Overwhelmed Brain
Keeping Current and Informed
Evaluating Your Funds and Adjusting Your Portfolio
Deciphering Your Fund Statement
Trade date or date of transaction
Transaction description
Dollar amount
Share price or price per share
Share amount or shares transacted
Shares owned or share balance
Account value
Interpreting Brokerage Firm Statements
Portfolio overview
Account transaction details
Assessing Your Funds’ Returns
Getting a panoramic view: Total return
Dividends
Capital gains distributions
Share price changes
Tallying the total return
Focusing on the misleading share price
Figuring total return
HOW OFTEN SHOULD I CHECK ON MY FUNDS’ PERFORMANCE?
Assessing your funds’ performance
WHICH TOTAL RETURN FIGURES ARE BEST FOR THE LONG TERM?
Bond benchmarks
U.S. stock benchmarks
International stock benchmarks
Deciding Whether to Sell, Hold, or Buy More
Handling bear markets
Dealing with fund company consolidations
Tweaking and Rebalancing Your Portfolio
The Taxing Side of Mutual Funds
Mutual Fund Distributions Form: 1099-DIV
Box 1a: Total ordinary dividends
Box 1b: Qualified dividends
Box 2a: Total capital gains distributions
Box 3: Nondividend distributions
Box 4: Federal income tax withheld
Box 7: Foreign tax paid
When You Sell Your Fund Shares
Introducing the “basis” basics
Accounting for your basis
Specific identification method
The “first-in-first-out” method
The average cost method
Deciding when to take your tax lumps or deductions
Cashing in long-term gains and keeping taxes low
Selling for tax deductions and the famous wash sale rule
Looking at fund sales reports: Form 1099-B
Getting help: When you don’t know how much you paid for a fund
Retirement Fund Withdrawals and Form 1099-R
Minimizing taxes and avoiding penalties
ISSUES TO CONSIDER BEFORE MAKING RETIREMENT ACCOUNT WITHDRAWALS
Making sense of Form 1099-R for IRAs
Withdrawing from non-IRA accounts
Understanding form 1099-R for non-IRAs
Common Fund Problems and How to Fix Them
Playing the Phone Game
Troubleshooting Bungled Transactions
Specifying Funds to Buy at Discount Brokers
Making Deposits in a Flash
Verifying Receipt of Deposits
Transferring Money Quickly
Losing Checks and Applications in the Mail
Changing Options after Opening Your Account
Making Sense of Your Statements and Profits
Changing Addresses
Finding Funds You Forgot to Move
Untangling Account Transfer Snags
Eliminating Marketing Solicitations
Digging Out from under the Statements
Getting Older Account Statements
Information Sources: Fund Ratings and Forecasters
Entering Cyberspace: What the Internet Is Good For
Understanding Online Perils
WHO’S FOOTING THE BILL?
Avoiding the Bad Stuff
Looking into market timing and crystal balls
Keeping them honest and providing new fodder: The Hulbert Financial Digest
Using bogus rankings, token awards, and mystery testimonials
Pitching a product: Filler and ads in newsletter form
Investing newsletter Hall of Shame
Dwayne Dweeb’s Personal Finance
Harry Hacker’s Mutual Fund Investing
MUTUAL CONFUSION: MISUSE OF FUND RATINGS
Getting In on the Good Stuff
Investment Company Institute
Morningstar
Reading a Morningstar bond fund report
Reviewing a Morningstar stock fund report
T. Rowe Price
Securities and Exchange Commission
Vanguard.com
EricTyson.com
The Part of Tens
Ten Common Fund-Investing Mistakes and How to Avoid Them
Lacking an Overall Plan
Failing to Examine Sales Charges and Expenses
Chasing Past Performance
Ignoring Tax Issues
Getting Duped by “Advisors”
Falling Prey to the Collection Syndrome
Trying to Time the Market’s Movements
Following Prognosticators’ Predictions
Being Swayed by Major News Events
Comparing Your Funds Unfairly
Ten Fund-Investing Fears to Conquer
Investing with Little Money
Investing in Uninsured Funds
Rising Interest Rates
Missing High Returns from Stocks
Waiting to Get a Handle on the Economy
Buying the Best-Performing Funds
Waiting for an Ideal Buying Opportunity
Obsessing Over Your Funds
Thinking You’ve Made a Bad Decision
Lacking in Performance
Ten Tips for Hiring a Financial Advisor
Communicator or Obfuscator?
Financial Planner or Money Manager?
Is Your Focus on Market Timing and Active Management?
Who’s in Control?
Fees: What’s Your Advice Going to Cost?
How Do You Make Investing Decisions?
What’s Your Track Record?
What Are Your Qualifications and Training?
What Are Your References?
Do You Carry Liability Insurance?
Recommended Fund Companies and Brokers
Index. Numerics
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S
T
U
V
W
Y
Z
About the Author
Dedication
Author’s Acknowledgments
WILEY END USER LICENSE AGREEMENT
