Archive for October 2015

Different Types of Mutual Funds

There are literally THOUSANDS of mutual funds available in the marketplace today.  Each mutual fund is usually assigned to a particular family of mutual funds.

Here are some common categories of mutual funds…

  • International Stock Fund
  • Aggressive Growth Stock Fund
  • Growth Stock Fund
  • Growth & Income Stock Fund
  • Equity-Income Fund
  • Balanced Fund
  • Bond Fund
  • Value Fund
  • Industry-Specific Funds (like Healthcare Fund or Pharmaceutical Fund)
  • Index Funds (S&P 500, Russell 2000, etc.)

If you purchase ownership in an International Stock Mutual Fund, you can bet that it is primarily investing in international companies.  If it is an Aggressive Growth Stock Mutual Fund, you would expect to see the mutual fund purchasing shares of companies that are growing like crazy.

Each family of funds has a general “feel” to it.  The International and Aggressive Growth Stock Mutual Funds tend to have wild swings in performance.  One year it could grow 40% and the next it could lose 25%.  It feels like you are on a great roller coaster ride at Six Flags!

Growth & Income, Equity-Income, and Balanced Funds are more stable and predictable.

Index Funds track specific market indexes like the S&P 500 and the Russell 2000.

Interested in learning more about investing? Check out my book on investing: “Oxen: The Key to An Abundant Harvest” HERE.

Establish Investment Goals

Goals! I love GOALS!! My goals spur me to save and invest. Today, I’m sharing about how my personal investment goals guide my mutual fund choices.  First you should know a couple of things about me.

  1. I view my investments as money that I will not touch for at least five years.
  2. I prefer mutual funds over individual company stocks.  I do own several individual company stocks, but I will not allow an individual company stock to exceed 10% of my overall portfolio. (See my current investment portfolio HERE)

My investment goals are GROWTH, GROWTH, and more GROWTH.  I do not need my investments to produce income for me as I am in my early 40s.  I want my money to GROW.  This means that I invest in mutual funds that are purchasing stock of companies that are experiencing major growth (like Google).

Now, if I were retired, I would want my investments to produce income so I would be searching for mutual funds that invest in companies that are paying dividends to its shareholders (like Wal-Mart, Microsoft).

If I were approaching retirement, I would be moving the money that I would need in the next five years to much more stable and secure investments.

What are your investment goals?

What is a Mutual Fund

One of the questions that I get asked the most at an event is: “What is a Mutual Fund?” Mutual funds can certainly sound confusing – especially when there are so many options available.  So for those who do not know what a mutual fund is, let me explain it the best I know how.

If something has been FUNDED, it means that money has been given to it.

If you and I come to a MUTUAL agreement, it means that we both were involved in making the agreement.

So if you and I have MUTUALLY FUNDED a project, then it means that we both provided money for the project.

A MUTUAL FUND means that you and I have both put our money in the same place.  It is not unusual for a mutual fund to have over 5,000,000 people MUTUALLY FUNDING the same investment.

So we have mutually funded an investment along with three or four million of our closest friends.  The amount you have invested is different from how much I have invested, but it is all in the same place.

So, we now all understand that we have mutually funded this investment and that it is called a mutual fund.  The next question to answer is: “Where does the money go once it is in the mutual fund?”

Well, each mutual fund has a specific objective.  Some mutual funds have an objective to produce income.  Others have an objective to maximize the long-term growth of the invested money.  Still others may have an objective to invest only in international companies.  The bottom line is that each mutual fund has a specific objective or charter.

Based upon a mutual fund’s charter, the mutual fund managers will purchase part-ownership in a lot of companies.

The Mutual Fund managers use the money provided by you, me, and three million of our closest friends to purchase ownership in anywhere from 50 to over 1,000 companies.  As these companies earn profits and grow, the value of the investment grows.  This means that each individual who owns a portion of the mutual fund can enjoy that growth as well.

I hope this post has helped understand exactly what a mutual fund is. Let me know below if you have any additional questions about mutual funds.

 

Put Your Oxen to Work – Part 4

Proverbs 14:4 – Where there are no oxen, the manger is empty, but from the strength of an ox comes an abundant harvest.

PART FOUR – Put your oxen to work!

This is the fun part!  As you put your oxen to work and provide adequate nourishment and attention, they will begin to work for you in ways you never thought possible.  Your 401(k) will grow without the need for any energy expenditure from you.  The rental house will produce income and increase in value even when you are on vacation.  The book that you’ve been wanting to write will be purchased by people from across the globe – even while you sleep.  The website will sell products without your direct involvement.  The team of people at your business will work to serve customers whether you are there or not.

Don’t make the mistake of thinking your oxen will work perfectly with zero involvement from you.  The last I checked, oxen will still wander off if you don’t provide them some direction and leadership.  Be sure to establish a system that allows you to always know the numbers and enables you to measure the health of your herd.

As your oxen work for you, they will truly provide an abundant harvest which will allow you to bless your family and those in need in ways you never thought possible.

TRUTH: Oxen acquisition can allow you to enjoy an abundant harvest.

ACTION:  Will you share with me one way you’re putting your oxen to work?

Put Your Oxen to Work – Part 3

Proverbs 14:4 – Where there are no oxen, the manger is empty, but from the strength of an ox comes an abundant harvest.

PART THREE – Acquire oxen.

The manger is empty when there are no oxen.  The manger is designed to hold food.  When faced with the decision of “empty manger/no food” versus “abundant harvest”, I am going to choose the abundant harvest every single time.  It is my belief that this would be your choice also.

Obviously, the critical step toward an abundant harvest is to have oxen.  These oxen, however, can be expensive.  Acquiring a McDonald’s franchise can cost hundreds of thousands of dollars.  Starting a business can also cost an enormous amount of money.  So where does one start out?  We must start out just like everyone else – start where you are with what you have.

I challenge you to write down your plans, hopes, and dreams on paper.  Seriously, take five minutes to ponder your goals and write them down.  Now, next to each goal, write down how much each goal will cost.  This process will help you understand the necessity of acquiring an ox or two.

My oxen acquisition started by fully funding my 401(k).  I contributed the maximum amount allowed by law.  Notice that I did not contribute just enough to gain the company match.  This is a great start, but to truly get the 401(k) ox to work for me, I needed to maximize my contributions.  If you simply can’t contribute the maximum, start with a little and increase it on a consistent basis so that you will be maximizing it in just a few years.  These investments seemed so little at the start that it seemed pointless.  Just 15 years later, however, the 401(k) ox is healthy and doing a LOT of heavy lifting for me!  It will do the same for you.

I use to live paycheck-to-paycheck but by applying myself little by little every single day, God has continued to bless me.  I am convinced beyond a shadow of doubt that He can do the same for you.

TRUTH:  Oxen acquisition can allow you to enjoy an abundant harvest.