Three Hidden Fees In Mutual funds
June 26, 2009
Investors in stock have to be wary of hidden fees in most managed mutual funds. These fees are hidden as they are not in published annual expense ratio. What is the effect of these fees? Since they are passed on to shareholder they could add up to 2 to 3% in addition to the brokerage commission. This in effect reduces your return on investments. This blog look at some of the hidden fees.
Custodial fees
A custodian of mutual fund is an entity that holds security owned by mutual fund. This entity could be a trust company, organization or commercial bank. The fee they charge is known as the custodial fee. It is important to note that, while virtually all fee-only investment advisors have custodial fees; most don’t readily disclose the fee. The only way to avoid this is to Investing directly in funds that you select yourself.
Brokerage fee
This is the cost of the broker who handles the transaction. Not all firms charge this fee firms brokers like Fidelity and Vanguard don’t charge for their own funds. This fee can be avoiding by reading the fine print gives to get the scoop on what brokers waive their fund transaction fees.
No loaded mutuals
These are No-load, no-transaction-fee funds. This reduces fund operating expenses, and hence a high return to the investor. Firms like Charles swab offer low expenses funds. However some people argue that management of the funds if more crucial that just looking at the expense. My opinion is that the funds are buy are well manages and have low fees.
However the investor has to reminder that just like with any business, running a mutual fund involves costs. For example, there are costs incurred in connection with particular investor transactions, such as investor purchases, exchanges, and redemptions. It is up to a prudent investor to do their due diligence to optimize their investment strategies
Five reasons why real estate investing is ideal
June 10, 2009
Many people are looking into investing in real estate most if not all because they believe it is ideal. I belong to three biggest networks in my area. In the latest network that l attended ,the guest speaker Don Derosa from Atlanta could not have reinforced more why real estate is ideal. This reminded me why l invest long term when it comes to real estate. This blog discusses the acronym ideal as relates to real estate investing.
Income
The I in the word Ideal stands for income generated from real estate. They are various ways of generating income this could be from wholesaling, lease options, holding rental units. Real estate provides a good source of income. This could be both short term or long term.
Depreciation
The letter D stands for depreciation. Depreciation makes real estate a favorable investment choice because it’s also treated as an expense for tax purposes. While only an expense on paper (since the owner actually pays nothing for it), it can nonetheless offset or shelter other income from taxation. Thus each year depreciation reduces the yearly income tax that l pay by reducing the reportable net income.
Equity
The Letter E stands for Equity.Equity is the financial interest or cash value of your home, minus the current loan balance(s). If selling the home, this would also be minus any costs incurred in selling the home. Every year am l pay down my mortgage my equity increases. So if l hit a hard time and wanted some moneys all l would do is get a loan against the equity in my property and the tenants are paying for my loan
Appreciation
The A is for Appreciation. Appreciation is the increase in value of a property over time due to inflation, supply and demand, capital improvements and other factors. Most real estate investors purchase income property for cash flow and capital appreciation. The real estate investor should therefore have a good understanding of the factors that cause real estate to appreciate in value. Understanding why real estate goes up in value can help you make more profitable investment decisions.
Leverage
Last but not least L is for leverage.This is the use of borrowed money to increase your profits in an investment. Building wealth via real estate requires the use of leverage. Real estate is the only investment vehicle that you can build wealth by using borrowed funds. Most investors use borrowed funds to invest thus having the ability to acquire more with less .
Five reasons why real estate investing is ideal
Two Alternatives To Loan Modifications
June 7, 2009
Two Alternatives to Loan Modifications
Loan modification is one of the affordable ways to keep your home. This is usually so for families that have children going to school in the area and really love and want to live in that neighborhood. However for those who do not qualify what are their options? This home owner may have two options. The current administration has encouraged troubled borrowers who don’t qualify for loan modifications or can’t keep up payments on a modified loan to pursue a short sale or deed their property to their lender in order to avoid foreclosure.
The first alternative is a Short sale Short sales often represent the best chance for distressed borrowers to avoid foreclosure. In a short sale, the seller arranges with their mortgage lender to accept a price that’s less than the amount they owe on the property. As part of this arrangement, the lender typically agrees to forgive the rest of the loan. As a result, the seller doesn’t have to go through a foreclosure, the buyer picks up a property at a discount, and the lender avoids taking on the burden of unloading the property. However this process takes 30 to 90 days and requires patience.
The other alternative to loan modification is deed in lieu foreclosure. A deed in lieu is where a deed is given back to the lender to fulfill the obligation to repay the debt; this process doesn’t allow the borrower to remain in the house but helps avoid the costs, time, and effort associated with foreclosure. … The deed in lieu of foreclosure offers several advantages to both the borrower and the lender. The principle advantage to the borrower is that it immediately releases him from most or all of the personal indebtedness associated with the defaulted loan. The borrower also avoids the public notoriety of a foreclosure proceeding and may receive more generous terms than he would in a formal foreclosure.
Recently, the federal government announced new incentives for lenders to work with troubled borrowers. They include a $1,000 payment to loan servicers who complete a short sale or a deed-in-lieu of foreclosure, in which the borrower simply relinquishes ownership.
The program also is offering payments of $1,500 to distressed homeowners to help with relocation expenses after short sales or deed-in-lieu transactions. It will offer payments of up to $1,000 toward the cost of paying second lien holders to release their loans. The U.S. Treasury will pay $1 for every $2 paid by the investors to the second lien holders.
Before one decides on a foreclosure on their home and the related long term consequences, it is to exhaust all the three alternatives first. This in order are the loan modification programs, the short sales and finally deed-in-lieu.
Two Alternatives to Loan Modifications
Loan modification is one of the affordable ways to keep your home. This is usually so for families that have children going to school in the area and really love and want to live in that neighborhood. However for those who do not qualify what are their options? This home owner may have two options. The current administration has encouraged troubled borrowers who don’t qualify for loan modifications or can’t keep up payments on a modified loan to pursue a short sale or deed their property to their lender in order to avoid foreclosure.
The first alternative is a Short sale Short sales often represent the best chance for distressed borrowers to avoid foreclosure. In a short sale, the seller arranges with their mortgage lender to accept a price that’s less than the amount they owe on the property. As part of this arrangement, the lender typically agrees to forgive the rest of the loan. As a result, the seller doesn’t have to go through a foreclosure, the buyer picks up a property at a discount, and the lender avoids taking on the burden of unloading the property. However this process takes 30 to 90 days and requires patience.
The other alternative to loan modification is deed in lieu foreclosure. A deed in lieu is where a deed is given back to the lender to fulfill the obligation to repay the debt; this process doesn’t allow the borrower to remain in the house but helps avoid the costs, time, and effort associated with foreclosure. … The deed in lieu of foreclosure offers several advantages to both the borrower and the lender. The principle advantage to the borrower is that it immediately releases him from most or all of the personal indebtedness associated with the defaulted loan. The borrower also avoids the public notoriety of a foreclosure proceeding and may receive more generous terms than he would in a formal foreclosure.
Recently, the federal government announced new incentives for lenders to work with troubled borrowers. They include a $1,000 payment to loan servicers who complete a short sale or a deed-in-lieu of foreclosure, in which the borrower simply relinquishes ownership.
The program also is offering payments of $1,500 to distressed homeowners to help with relocation expenses after short sales or deed-in-lieu transactions. It will offer payments of up to $1,000 toward the cost of paying second lien holders to release their loans. The U.S. Treasury will pay $1 for every $2 paid by the investors to the second lien holders.
Before one decides on a foreclosure on their home and the related long term consequences, it is to exhaust all the three alternatives first. This in order are the loan modification programs, the short sales and finally deed-in-lieu.
Three Cash Management Areas That Led To Business Failure
June 2, 2009
Statistics has it the 50% of new businesses fail within the first year. And out of the 50% of business that remain 95% will fail within the first five years. This is not very encouraging however it is the realty. Since am within the first five years of my business, am always researching into areas that will improve my business. This blog looks at three areas of cash management that lead to failure of start up businesses.
Lack of cash.
Any new business will need operating income and sustaining income before it generates profits. This is what is commonly referred to as initial capital. They tend to be an underestimate of how much will be needed to run the business. Other incidental costs that were not provided for surface that led’s to cash shortages. Hence it is advisable to have various lines of credit. Even in real estate where one can buy property for no money down. Some capital is needed for marketing these properties.
Inadequate cash flow
Three to four months later the inadequately financed business lacks money for daily operations. This is commonly referred to as cash flow. A cause of inadequate cash flow is when the outgo exceeds income. This can be overcome by having reserves in lines of credits. Optimizing cash flow management is one of the most important tasks in achieving overall financial health. It is also a leading cause of business failure in the first year of operation
Not protecting yourself
This occurs when someone finally makes it and is now attracting unwanted guests. This unwanted guests come in form of lawsuits. It is no wonder they are more lawsuits now more than ever. To best protect what one has worked so hard for. Business should be in business entities such as: in limited liability companies, s corporations, c corporations limited or limited liability partnership. Note that l have intentionally left out sole proprietorship as it does not protect you against laws suits.
Having understood the three cash management areas that cause business failure, it is important to educate oneself on how to best be prepared before the inception of a business endeavor. The best time to have cash is when you do not need it.
