Category Archives: Saving & Investing
Prior to deciding on this answer it would be advisable to get the basics clear. Index is defined as a list of companies that are chosen from the stock markets. The rise and fall in the value of ratio of a consolidated collection of stocks in an index, for a specific time period is manifested through the return offered by the index. ETFs work on market capitalization and bonds. Since the index in itself is non-tradable, the investors are required to purchase all the stocks mentioned therein.
Although the ETFs can fluctuate, the investment can remain secure. You stand to receive the net asset value of your mutual fund investment. After the day’s transactions are over, this value is calculated. This is obtained by dividing the profits or losses by the total number of shares that constitute the fund. The movement of the ETF price is akin to the share prices. The closing price of the day is the ETF for that particular day. There are no further calculations required. The mutual funds are managed by professionals. For a mutual fund there might be a minimum subscription amount, while the ETF do not impose any such restrictions. But, the shares of the mutual funds are not burdened by brokerage charges; as such, the investor can transform his returns as handsome savings.
The choice basically depends on the expectation and objective of the investment portfolio.
The equity performance in America is usually determined with the Standard & Poor’s 500 Index. Constituting of over 70% of the publicly traded companies in the U.S., the S&P Index is hugely popular given its close proximity with the some of the well-known mutual funds that are currently in operation. They are the Vanguard 500 Index Fund, and Spiders (AMEX: SPY), the first exchange traded fund (ETF). The investors can save effectively through it given the fact that the S&P comprises of 500 companies belonging to a diverse range of industries. It is often misapprehended that these 500 companies are rated due to their revenues or market capitalization. But it is basically, the best of the common stocks of the U.S. The factors the work in the selection are sector representation, liquidity and market size.
The investment of the investor stands secured when it is done following the notifications of the S&P 500 as he gets an opportunity to enjoy the benefits of earnings from diverse fund allocation. Nearly every relevant section of the American economy is covered and hence, all the market growth and movements that take place in these sectors earns you rich dividends. Savings is also substantial following the low expense ratios. But at times when the price movement of a limited number of stocks is taken into account, there can be an incomplete picture of the actual price movements.
Investors who have the skin to bear the heat of price fluctuations and market volatility can consider the Small Cap Index Funds as an amazing investment tool. These investors can attain savings as they go for indexing in stocks through an indexing approach. The investment can be diversified and it can experience substantial growth if you make it a part of the asset allocation program. This can also be a wonderful retirement investment option. The investor who desires to open an account in this type of fund simply requires an initial investment of $250. Here, $50 is regarded as an automatic investment.
Investment in Small Cap Index Fund is not a small term investment option. The investment offers you capital appreciation and the values may also experience substantial variations, depending on the market movements. The assets of this fund are collected as a separate series of the Master Fund, which is termed as the Russell 2000 Index Master Portfolio. 90% of the assets get invested in stocks in the form of Russell 2000 Index. The investor can earn good returns when the stocks of the small companies are purchased, as they can reap the maximum benefits of market volatility. The factors that need to be checked in this regard are like, the market risk and the management risks. It always pays off to diversify in a volatile market.
Proper allocation and investment of savings is an important part of an effective retirement plan. Today, there are a number of retirement plan sponsors who are interested in making the index funds the focal point of the investment portfolio. Reports referring to surveys indicate that 17% of 150 employers desired to substitute index funds for a part or whole of their actively managed investment options. This constitutes to around 8% increase. According to Mike Lucci of Vanguard Institutional Sales, the enhanced interest in Index Funds is a great opportunity for investors designing a retirement plan, as it can help them to secure their capital and save in turbulent market conditions. The plans are characterized by supplemental passive investment options and active funds are replaced with a unique line-up of highly diversified low cost index funds.
Participant communication, a simplified plan design coupled with multiple levels of investment choices are marked as endearing attributes for retirees. Savings can be attained through the low-cost indexing, broad diversification and the cash drag is kept low.
Just a few points of caution:
The investor is required to take note of the inflation risks, credits and the prevalent interest rates while investing in bonds. Diversification may not shield you in a declining market. As a plan sponsor, Vanguard believes that they can effectively determine what the best interest for their participants’ prudence is.
The plain vanilla high yield savings account is no longer active; it has been replaced by an even better option, the High Yield Money Market Account. Here, the investor is allowed free checks and a debit card in order to easily access his cash. Just like the other money market accounts, here too, there are certain specific limitations on withdrawals during every statement cycle. This makes it important for the investor to plan beforehand, so that he can effectively manage his portfolio and his investments remain well-planned. The details of the services can be obtained from the website of the bank and the APY is the main promising feature in here.
There are no service charges or minimum balance requirements with Capital One. An account can be started with just $1 and it can be linked to your existing high yield account too. No fees are charged against the request for transfers and it can be readily done after you log in. this free, flexible and unlimited account linking is a very vital and attractive feature of Capital One. The investor can network with a variety of different accounts and effectively transfer the money without resorting to mail. The investor is further presented with a money market account and a debit card. In order to enjoy ready access to the money, at least $100 as balance is needed.
Even if your bank crashes down, the FDIC Insurance can effectively protect your savings. Investors consider banks as a safe haven for their hard-earned savings and capitals. The banks on the other hand loans out the money and invests it in a variety of projects. If any of these activities goes haywire, the money deposited by you may well face the danger. Under such circumstances, the FDIC Insurance offers security and helps the bank to shield your cash from any probable damage.
The FDIC covers deposits that fall under the category of Checking accounts, Savings accounts CDs and Money market accounts. Here, one needs to note that the money market funds are not covered by the FDIC. This insurance cover is not extended to the safety deposit box contents, the investments like the mutual funds or stocks and the insurance products of the likes of annuities. Further, the products mentioned above do not fall under the category of deposits. This is in spite of the fact that, these products might have been bought from the bank. The credit unions also do not fall under the purview of the FDIC Insurance.
The basic insurance limitations are:
- Every depositor can have up to $100,000, covered.
- For a retirement account, the depositor can have $250,000.
These limits can vary again with the different banking institutions. The depositor can well increase his coverage by going for multiple bank accounts.
In comparison to the checking account rates, the money market does offer better returns. The investor can attain effective interest earnings as well as indulge in active and profitable cash management. There are several banking institutions that can be resorted to in this aspect. The APY percentage for the savings account is 2.30% and the interest rates are 2.27% in the Valley Community Bank. In Choice Financial, the APY percentage is 2.26% in their RateBuilder Savings. The given APY percentage is for one month introductory rate and then the rates revert to the usual rate tiers. The investor is not allowed to make than over six withdrawals or transfers each month.
For the Georgia residents, there is the Darby Direct. The savings account in this bank offers 2.25% on their high yield online savings account. Then, there is the Quantum National Bank that offers 2.00% interest rate on their money market accounts and an APY percentage of 2.02%. This allows the investor earn as much as $100,000 as an APY. In the UFB Direct, the interest rate for the savings account is 1.98% and the APY percentage is 2.00%. This is a US Savings account where the investor is allowed to make six pre-authorized transfers for each cycle period. One can also access this account with his ATM card. You can get to know about the rates from the UFB Direct website. //
In the data compiled by the US Treasury market, you would find that after a grand surge in August, the savings account rates have again begun to fall. Investors might feel depressed by the low rates, but savings account does not really have an alternative when it comes to savings. A very appealing savings account rate may not be available, but the investor is required to be aware of the factors that affect these savings account rates. The average bond market and the stock market have fluctuated in the recent times due to the economic disillusionment. //
Say, the situation when the savings account rate slipped down to 1.5%, the deals that were above 2% still remained unchanged. A lot of the banking institutions had their savings account paying less than 1%. Often it is found that the investors happen to stay with the savings account by default. A little action with regard to altering the status of your investment portfolio can prove to be a source of rich dividends for the future. You may stand to earn the full 1% in your savings account rates. Any neglect in this effect might turn out to be dear. In general, the common perception is to wait till the period when the average savings account rates would rise. We find that the power to reap benefits is more in the hands of the depositors today.
E-Loan’s online savings account is worth taking a look. A visit to the E-Loan’s savings website can provide you will all the details in this regard. It is a no-frills offer, which is combined with a competitive rate. The Annual Percentage Yield is considered to be one of the best with respect to the online savings account. There are no fees charged on the balances of this bank. The investor is provided with an externally linked account through which he is able to get access to his money or deposited amount. Given below are a few vital aspects of the E-Loan savings account:
- The investor requires a minimum deposit of $5000 in order to open an account and after it gets opened the balance can become lower than that, if required.
- The investor is allowed a maximum of six withdrawals every calendar month.
- The deposit is offered FDIC coverage for any amount up to $100,000.
- There are no deposits that are allowed through mails.
- The interest that is earned can get compounded on a regular basis.
Apart from these advantages, the investor is required to be wary of certain factors that will secure his savings in the long run. The flexibility factor is quite limited out here. As the transfer of money from the accounts is limited, you might not be able to debit your insurance from your existing account.