COMPLETE SOLUTION TO WRITE YOUR OWN PROFESSIONAL BUSINESS PLAN

COMPLETE SOLUTION TO WRITE YOUR OWN PROFESSIONAL BUSINESS PLAN

The best way to start or expand a business venture is to plan it. Business plan is a written document that describes and analyzes your business venture and gives detailed projections about its future. A business plan also covers the financial aspects of starting or expanding your business, how much money you need and how you will pay it back. Business plan not only help you get money from lenders or investors but help you make a strategic decision about your business venture. Business plan then becomes an imperative for every business venture that wants to grow big.

Business plan writing is generally seen as a difficult task which takes a lot of time to complete. When it comes to financial plan section of a business plan it is usually a no-go area for some entrepreneurs simply because they don’t understand simple accounting terms or have no prior knowledge in financial accounting. Entrepreneurs with prior knowledge in financial accounting or business plan writing don’t want to write business plan themselves because it takes much of their time especially when using the crude method or approach they were trained with. Even, when they try to write it themselves, there are bound to be mathematical errors in their calculation. Also, well calculated financials are not professionally arranged and presented.

To overcome all these hurdles, Kaspharyn Solutions has come up with a complete business plan solution that will help anyone with no MBA qualification or prior accounting knowledge to confidently and speedily produce a professional business plan with error-free financial forecast, charts and graphs. With this complete solution, you just need to plug in your numbers and the calculations are done for you. Your write-ups can be exported into Word, PowerPoint, PDF, etc. and table of contents is automatically generated alongside. Now you have instant access to business planning calculations and an explanation of every financial term. The complete business plan solution will also empower youths to generate income from writing of business plan for other entrepreneurs and companies.

The Complete Solution comprises;

1. Business Plan Software (Premiere Edition)

2. Business Plan Software Installation Guide

3. Standard Business Plan Samples that worth more than $1000

4. Mentoring and Expert Advice

What are you waiting for? Grab the opportunity now!!!

Click 'I want this!'
http://www.agropreneurszone.com/

Online Businesses- How to Make Money Selling Ebooks Online

How to Make Money Selling Ebooks Online

The internet has changed so many things in our world. Snail mail letters were replaced with email. We Skype instead of draining our wallets with long-distance phone calls. And we shop on Amazon instead of fighting for a parking space and dealing with the crowds at the local shopping mall.

And that’s just a small taste of all the disruptions we’ve enjoyed thanks to the internet. One of the biggest disrupted industries, and one of those that provides a great path to a solid making money online venture for an individual entrepreneur, is in book publishing.

You see, what the big publishing houses do with big offices of editors, writers, administrative staff… and then big printing presses… then distribution centers to get their books out to bookstores around the country… all to hopefully get books in the hands of customers… you can do on the computer you have right now. If that’s not massive disruption, I don’t know what is.

There are some key differences between this self-publishing (which, by the way, doesn’t have the negative connotations it used to) and traditional publishing. You won’t be dealing with printed books, for one. That eliminates the expense and hassle of actually creating books, storing them, and delivering them — and that may not even sell. It’s going to be all digital. These are ebooks, which can be read on devices like Amazon’s Kindle, on another tablet or smartphone, or even on a computer.

From humble beginnings, ebooks now sell in the millions each year, representing about 20 percent of the publishing market in the United States.

Industry watchers say that by 2018, ebook revenues will reach over $8 billion per year. And there is plenty of room for a one-person ebook entrepreneur to get a piece of that market.

What Are Ebooks?

Ebooks are, well, books. But in a format where they can be delivered or downloaded online. You can write them yourself, employ writers, use public domain content, and create your ebooks from many sources.

And just about any subject can be covered — just as many, if not more, than what a traditional publisher might release because you can tailor your tomes to niche markets. Travel guides, how-to manuals, mystery, romance, science fiction, self-help, technology, religions… just about any subject is fair game as long as there is a market of ready buyers. (One of the best ways to check for is to scan the bestseller lists on Amazon. And not just the overall list but also the ones for categories and subcategories.)

Also, you won’t have to rely on an editor or publisher telling you whether a book will be published. And you won’t have to rely on a bookstore to put your book on its shelves. You’re in control.

In fact, you’re going to handle everything yourself, including marketing and selling. And that means you get to keep all the profits. They’re nothing to sneeze at.

Self-published authors have had big success in recent years. Take Hugh Howey, who sold a series of science fiction books through Amazon’s Kindle Direct Publishing. At one point, he was selling 20,000 — 30,000 copies a month, which generated $150,000 in income monthly. Amanda Hocking, who writes “paranormal romance” and fantasy novels, has sold well more than a million books on Amazon, generating over $2 million in sales.

Perhaps most famously 50 Shades of Grey author E.L. James’s erotica series started life as a self-published work before being snapped up by a traditional publisher and turned into a movie.

Let me show you how to build the same type of business.

Starting an Ebook Business — Where You Sell

As an ebook publisher you have a few options available for selling your works.

You can set up your own website and sell your ebook directly online. You might make a PDF available to your readers for example. A simple shopping cart or PayPal link and you’re all set. A reader visits your site, they order, and they get a download link and get your book.

It’s pretty much all automated, and you simply keep an eye on things to make sure the site is running smoothly.

One of the easiest ways to sell ebooks is to work through a third-party site like Amazon. You may have ordered products, even books, from Amazon in the past. But this is a whole different side to this massive ecommerce site.

The big benefit to working through Amazon Kindle Direct Publishing, even though they charge you a commission on your sales, is their reach. Around 89 million Americans are said to be active ebook readers. That’s your potential audience, all those people visiting this site and browsing for a new book. It could be your book they find when doing a search on a related keyword. In fact, 38 percent of daily sales of ebooks on Amazon go to self-published titles.

The process to selling your ebook on Kindle is straightforward. You sign up, then upload your ebook. They take care of converting it to their proprietary format. Then you’re ready to sell and grow your business through Amazon.com.

Where to Get Your Content – The First Step to Creating Your Bestseller

Believe it or not, you might already have most of an ebook written already. If you are already making money with a blog, those blog posts could be turned into an ebook with some editing. Simply collect relevant blog posts into an order that makes sense, make any needed edits so that references that aren’t relevant are taken out, and add an introduction and conclusion, and you’re done. Any blog posts you use should cover the same or related topics and work well together.

Of course, that’s only one way to put together the content for your ebook. If you want to publish an original work of fiction or nonfiction — something you write yourself fresh — that is also a good option.

The key part, if you’re starting from scratch, is to work steadily towards your goals of finishing that book. Write something every day! Start with an outline and then fill it in.

You can also repurpose a book that is in the public domain. This means the copyright has expired and anybody can take the content of those books, and publish them, either updated or reworked in some way or as is. Did you see that book, Pride and Prejudice and Zombies that came out a few years ago? That’s a great example of reworking a public domain book.

You can find public domain works, which include classics like Call of the Wild by Jack London and Shakespeare and books on just about every subject you can think of (a quick search yielded dog training guides, a how-to guide for amateur singers, and much more), in places like Project Gutenberg.

Marketing Your Ebook

There’s a dirty little secret in the traditional publishing world. Publishers usually don’t actively market or promote the vast majority of the books they release. Only those from established best-selling authors get this attention.

But, as an ebook publisher, you’re going to relish having this same control over your marketing and sales strategy. With all the options available, you should have no problem finding a way to get your book title(s) out into the world and grab the attention of potential readers.

I recommend a multichannel approach — approach the marketing from several different angles. One definite channel is social media. Leverage your Facebook page, Twitter, LinkedIn contacts, and more to get the word out. When the book is published, post it on Facebook with a link back to your website with more information and a way to order, for example.

But it’s not enough to send out one announcement. You have to build buzz around your ebook. Encourage people to tell friends about your ebook and spread the word. Post content related to your book. Create contests. Do giveaways. Get creative with your marketing.

You should also promote your book on your blog, get active in forums related to the topic your book is about and tell people about it, and if you have an email list, be sure to promote it there too.

You might also offer a free chapter of your ebook. That will get readers hooked so that they want more and will buy the rest of the ebook.

Some Dos and Don’ts for a Successful Ebook

Making money from ebooks isn’t automatic. You can’t just put anything in it and hope to profit. It’s not a difficult task, but you should follow some best practices to make sure your ebook draws attention from readers and generates sales.

Don’t Get Overwhelmed

Just because you’re writing a book doesn’t mean you have to stress out. With a plan in place, you can finish your work and put it on sale.

You just need to create an outline for the book to follow, set a schedule for when you’re going to write (if it’s original work) or when you’re going to work on it, how you will market the book and when each task needs to be done, and set a goal publication date when it will be offered on sale. It’s a matter of setting aside time each day. You can’t just work on this when you “feel” like it… otherwise, it’ll never get done.

Do Choose a Topic You Know About

You want to write with authority and confidence… and passion. It’s not a good idea to pick a topic just because you think it might be a best-seller.

Don’t Make Your Writing Flowery and Complicated

Make sure all your text is easy to read and understand. It's better to write in a conversational manner and not in an academic manner.

Don’t Forget About Proofreading

Double check for grammatical errors, misspellings, etc. Make sure you have a trusted friend or even professional proofreader go over your ebook before publication. There’s nothing worse than releasing a book full of errors — it doesn’t inspire confidence in your readers.

Do Create a Professional Layout and Cover

Just because you are self-publishing doesn’t mean you want it to like an amateur did it. Hire a graphic designer on a site like Fiverr.com to create a good-looking cover based on your direction and input for not much money. They can also lay out the interior pages too.

Taking the Next Step

So now you understand why selling ebooks can be such a money-maker, it's time to get started. Figure out what type of ebook you want to sell, where you’ll get the content, and then where you’re going to sell it — and how you’ll market it online.

It’s a low-cost, low-risk business opportunity that has a huge upside!

Online Businesses- How to Make Money Selling Information Products Online

How to Make Money Selling Information Products Online

After the internet became a mainstream phenomenon in the late 1990s, it changed life as we know it. Communications, travel, music, government… shopping.  Yes, retailers large and small have embraced the Internet as a way sell to customers across the country… and around the world.

E-commerce has grown exponentially over the last decade and shows no signs of slowing down. Consider that 40 percent of the world’s internet users, that’s more than 1 billion people, have shopped online at least once.

And worldwide business-to-consumer online sales were $1.7 trillion in 2015… and that grew to $2.35 trillion at the end of 2016.

Large e-tailers like Amazon and eBay, as well as traditional retailers like Walmart, have embraced the online business model wholeheartedly. But even though they may dominate the industry, that doesn’t mean there isn’t room for small operators like you.

In fact, there’s never been a better time to get involved in selling online as a solo entrepreneur. It’s so much easier to make money with an online business than have a bricks-and-mortar store. The risk, the investment, and time spent is so much smaller.

Along with all this e-commerce activity has grown a whole new way to create and sell products. And it happens to be the easiest, most cost-effective, and oftentimes most profitable way to operate an online business. I’m talking about selling information products.

What Are Digital Information Products?

An information product can come in all sorts of formats, but at its heart a product like this must pass on useful advice to the consumer.

Despite the name, people don’t want simply information. They crave tips and strategies for making their life better. They want guidance. And that’s what the best information products provide, whether it’s a video, an ebook, an audio, a webinar, a membership website…

Keep in mind that in this case, although a CD or DVD or a printed book is technically an information product, we want to focus solely on those products that are delivered electronically, usually via download or some secure membership website.

For example, an ebook in PDF format, a video on a password-protected site, or an audio recording downloaded from your website.

The reason for this is because this way your customers can order products anytime day or night, from anywhere in the world, and get their product instantly, without you being involved in the transaction. It’s money while you sleep. Sure, you will have to handle customer service and keep an eye on sales. But it’s much less hassle than having to keep track and send out orders.

Why You Should Sell Digital Information Products Online

There are several more advantages with digital information products.

1. They are easy and cheap to create. You can make a digital information product using nothing but your time and mental energy. That’s free when it comes to your investment money-wise. You just need ideas. Then you write your ebook, film your video, record your audio, create your webinar… whatever you plan to do. This also means that if the product doesn’t sell as well as you like, you haven’t sunk any money into the project. That reduces your risk and financial exposure.
2. It’s virtually free to store them. Because these products are digital, they are simply space on a server, on your computer (make sure to back it up), or on the cloud. For people with physical products, if they're not doing online drop shipping, they have to carry large inventories. That costs money to store and manage all that product if you have a warehouse and have hired a fulfillment house or other provider to oversee it.  And don’t even think about doing it at home — you’ll quickly become overwhelmed. Much better to stick with digital in which your products take up basically no space.

At this point, you might be worried. You’re thinking that if you have digital products being sent to customers… what’s to stop them from sending copies to their friends or selling it on their own? Nothing really. But rest assured that 99.9 percent of your customers won’t do this. And for the most part information marketers aren’t too concerned about this issue cannibalizing sales.

How to Find a Profitable Market for Information Products

So how do create your own information products… and make sure they’ll be bestsellers?

The first step is research. You need to follow the trends and figure out what themost profitable niche markets online are right now and what format would work best to meet that need.

A great place to start is with your own interests. If you can match a profitable business with a passion, you’re all set.

So start with an interest you have. Then start checking around online to see whether you are the only one who loves… online poker, for example. Look for blogs, Facebook groups, and online forums for discussions about this niche. Look at the mainstream news — is it mentioned? Look at retailers like Amazon or eBay to see what products they have for sale in this niche.

For information products in particular, you should check out the site Clickbank.com, which used to specialize in information products although it has branched out into other areas.

You’ll find many categories in all of these places, from yoga to dog training to travel planning to weight loss and fitness… there’s sure to be something that you’re interested in.

From all these sources you’ll get a good sense of whether or not this a viable trend with sales potential. You should also research what sorts of products are offered, the topics they cover, the prices… this is also vital market data you can use to guide as you create and sell your own similar information products. You’re not plagiarizing or ripping off — you’re getting inspiration.

It may seem counterintuitive to seek out thriving markets and then try to join in. But that simply means that there is a ready market for your products. It’s not good to be a pioneer and try to create a market from scratch — that’s often a recipe for failure. Your prospect’s follow trends and latch on to fads… you should too. At least until the next trend comes along.

How to Create Digital Information Products

As far as creating your information products, that’s easy too. Remember that the content, whatever the format, should be useful advice. You could create how-to guides, strategies, tips, and tricks… provide something the prospect can’t get on their own.

For ebooks, magazines, and similar products, you can create them in Microsoft Word and then save them as a PDF. For the cover, find a freelancer on a site like Fiverr.com to create a professional looking cover for you for very little money — as little as $5.

To film videos you can use your smartphone or a simple point-and-click camera. Once you have the “raw” movie file, you can use an intuitive video editing software like iMovie (if you have a Mac) or Windows Movie Maker to create your own cleanly edited video.

Audios are simple too. Just use GarageBand (if you have a Mac) or the Sound Recorder app on Windows Media Player to record your voice. You will need a microphone.

If you want to interview others, you could use something like Skype or GoToWebinar.

Another option, if you’re showing people something your computer screen, like explaining the features of a piece of software, you can use the screen capture program like Camtasia to film every second of what you do to playback later.

How to Market Your Information Products

In many ways, no matter how far we’ve come when it comes to technology and online selling… the same principles of marketing and consumer psychology hold true. And that’s definitely the case with your online venture.

The name of the game here is direct-response marketing. Back in the day, this was done with snail mail flyers, letters, magalogs, catalogs, and other printed material. Yes, so-called “junk mail.” But they wouldn’t send it out by the millions if it didn’t work. These days this sort of content is sent out electronically. And it still works like a charm to get customers to open their wallets.

The good news is that you don’t have to spend a ton of money when you engage in direct-response marketing online. Email marketing is a virtually free method to reach sell your products. And that will be the basis of your marketing efforts.

The basic idea is create a list of email subscribers. You send them both useful content — free valuable information related to your product/niche, as well as offers to buy products. Sending them the free content will speed up the process of them knowing, liking, and trusting you enough to buy your paid products. The novelty of buying stuff online wore off years ago and now people have a lot to choose from — you must give them a warm fuzzy feeling to be the one they buy from.

Yes, only a small percentage of people will actually respond. But that’s how direct response works. You should have enough prospects coming in that even a small percentage of conversions will result in a profit.

To build an email list, you can employ a variety of methods.

1. Search Engine Optimization: In a nutshell, you use valuable content on your website or blog to catch the attention of Google and get listed high in the search results.
2. Paid ads: Whether you use Google’s own pay-per-click ads or banner ads or run ads on a blog network, this can be a viable option, albeit expensive.
3. Social Media: Networks like Facebook are invaluable at reaching a targeted customer base these days.

So how do you take it to the next level? You tap into that small amount of people who buy your introductory product, also known as a front-end product. You contact those people differently than your normal subscribers.

Because they have bought something, they are more likely to buy similar products. So you offer them more in-depth, higher-priced products, known as “back end products.” That’s where the big money is. A back end product could be one-on-one coaching or an event, for example.

Putting It All Together

As you can see information products make for the perfect online business. They’re digital, easy to create and deliver. And the profit margins are huge.

So next steps…

1.  Find your niche – make sure it has bestselling potential.
2. Figure out which format works best for your niche: audio, video, ebook, etc.
3. Create your information product(s).
4. Create an email list and then market to that list.
5. Profit!

On a final note, another simple way to make money online is selling digital information products as an affiliate.

Online Businesses- How to Get Started and Make Money with an Online Business

How to Get Started and Make Money with an Online Business

An online business can be anything from a small blog to a major e commerce operation. If you're looking to start your own online business, we'll show you how to make money online, get more website traffic, and promote your business on the internet with email and social media marketing.

It’s never been easier to start your very own profitable online business. Whatever your niche, whatever your product, whatever your industry, there’s a place for you in the marketplace.

There are several factors at play here.

• More people than ever are shopping online. According to industry watcher Mintel, 69% of Americans do so regularly.
• The software and online tools available make it possible for anyone to build and manage an e-commerce website. And you can do it for well under $100.

• Marketing online is cheap and easy - again, anybody can do it. And with social media platforms like Facebook, there are ever-increasing ways to reach your customers.

But how do you get started? How do you go from where you are now to a massive passive income that allows you to quit your day job and enjoy ultimate time and financial freedom?

Well, you start from the beginning and go from there. Here are the steps to creating your online business, proven methods used by thousands of successful online entrepreneurs.

Pick a Profitable Market

This is where you have to set aside your own ego for a minute. You may have had a “dream business” in mind for years. You just know in your heart that a certain niche is profitable… that a certain product will sell like gangbusters. But until you do the actual market research you won’t really know. And it’s not worth investing your startup capital… creating products… or setting up a website until you know for sure a particular market is worth pursuing.

Basically, you have to start with the market first. You have to identify what niches are popular right now… and what types of products are hot. But be careful not to pick something out that is a flash in the pan and will go away soon. (Remember those wheeled “hoverboards” that were all the rage around Christmas - where are they now?) Instead, you want something with staying power.

There are many markets like this like pet care, exercise programs and weight loss, nutritional supplements, natural cures, travel, photography, video games, golf… the list goes on.

Some ways to identify a hot market are to look at online retailers like Amazon.com. What are the top sellers? Keep an eye on the news. Pick up magazines and see what’s advertised or what is being written about. Also, what are people talking about on Facebook… and what’s being advertised? All this provides clues for finding a potentially profitable market.

It may seem counterintuitive, but you want to see a lot of competition in your market. It’s actually best, at least for a small-scale entrepreneur like yourself, to not be a pioneer that is first to market. You want to go where there’s a ready and large group of people ready to buy.

What’s left is matching one of these hot markets with something you’re interested in. With so many potential markets out there, you’re sure to find some way to match your passion with profits.

Related: How to Pick a Profitable Niche for Your Online Business

Find / Create Products to Sell

Once you’ve picked your hot market with profit potential, it’s time to figure what to sell them.

You have two options: find existing products to promote as an affiliate or create your own products. Each has advantages and drawbacks.

But first, you have to figure out what types of products you should you sell. Again, you can look at sites like Amazon and eBay to figure out what types of products are selling best in certain niches. For example, in the weight loss niche, diet books, and exercise programs sell very well. And there are many companies and online merchants offering them for sale.

A low-risk way to get started with products is to sell other people’s products. You don’t have to spend time or money to develop them, they’re proven to sell, and you won’t have to worry about delivery (either in the mail or electronically), storage, managing orders, customer service, refunds, or anything like that.

This is called affiliate marketing.

Basically, you do the marketing and customers order through your e-commerce site. But the company that created the product handles the rest. And, as an affiliate, you get a commission (from 5% and up, depending on the product) every time somebody buys. This is a great way to get started with your business.

Amazon has a good affiliate program, with a huge variety of products. Clickbank.com specializes in information products, although they have physical products too. You’ll find big-name retailers on CJ Affiliate by Conversant (formerly called Commission Junction). But just about every niche and industry has an affiliate program - do some online digging if these don’t fit your market or business.

Of course, if you’re ready to create your own products, you could do that too. But you wouldn’t want to create a physical product necessarily because that can require a big upfront investment with no guaranteed return.

A lower risk way to do sell your own products would be to create information products: ebooks, membership websites, videos, audio programs… For example, if you were in the organic gardening niche you could have an ebook special report on growing organic watermelons or a video showcasing the best techniques for pest control without pesticides.

If it’s electronic it can be easily stored online or digitally, and delivered the same way. That makes it extremely low cost and automatic. The only thing you spend to develop these products is your time and expertise.

See Also: 5 Simple Ways to Make Money Online

Set up Your Website

You have your market… you have your product. Now it’s time to set up your online storefront, which is where you’ll market and sell your products.

You don’t have to be a tech genius to set up your own website… and you don’t have to hire an expensive web designer either. With the software and online programs and services available today, anybody can create a professional-looking website with a shopping cart, list building capabilities, blogging - in short, everything you need for your thriving online business.

And the best part of all is that it’s either free or very low cost. With programs likeWordPress or Squarespace they offer ready-to-go templates. Creating your site is as easy as filling up boxes with your sales pages, email sign-up boxes, filling in your products in your shopping cart, and other content. If you can send an email, you can do it. Plus, you can update and change your sites look, its content, and everything else whenever you want.

These are robust platforms, with plenty of apps and plug-ins for search engine optimization, your marketing efforts, analytics to track visitors to your seat and much more. As far as hosting and picking a domain name, you can handle that through these services or go on your own with another service like GoDaddy. It’s up to you.

Why not hire a professional to build your website? They’re expensive for one. They take forever. You have to contact them (and pay them) whenever you want to make changes. And they charge by the hour, which isn’t good when you’re on a start-up budget. Besides you don’t want to be at their mercy - you want to be able to update and make changes immediately when you need them done.

See Also: The Top Budget-Friendly Web Hosts for Your Online Business

Create a List and Market to It

When you have a business, you need customers to survive. That’s a no-brainer. But how do you find prospects - people interested in your product - and turn them into buyers?

For a startup, small-scale online business, it’s best to seek out your target market, ask for their email, and then market to that list.

You add email addresses through a variety of methods. The cheapest - but most time-consuming method - is to slowly but surely add valuable content about your niche to your website and/or blog. This will attract the attention of search engines like Google. These search engine optimization efforts will pay off in increasing traffic to your website by those people searching for information on your topic. A percentage of those people will sign up for your list. That’s why it’s best to have a sign-up box, usually asking for a first name and email address, prominently on your homepage.

You can also build your list through social media like Facebook, paid advertising(banner ads, insert ads, or pay-per-click ads), and more.

Related: 3 Free Ways to Market Your Business Online

Once you have your list, you have to start marketing. But it’s not about sending sales offers day after day. People will soon unsubscribe or even report you as spam.

It’s important to pass on valuable information to your prospects as well. Give them plenty of freebies - tips and tricks in your niche. This makes them know, like, and trust you. You could “warm them up” with valuable content in a newsletter, for example. You could also do so in your blog, ebooks, special reports, Facebook posts, videos, and audios.

Of course, while you may be a nice person, you’re not in this to simply be a humanitarian. You want to make money too. So you also have to send sales offers. Again, you have to have finesse here.

You can’t just send them an order form. You have to show them the benefits of the product. You have to paint a picture (figuratively) that shows them how their life will be better if they use your product. You have to provide proof that it works. And finally, you have to give them a push to buy the product - a special offer they can’t refuse.

People are naturally resistant to buying something new. You have to create excitement… desire… for your product.

You do that with effective sales copy. It’s the art of using words to tap into consumer psychology. And you must use these principles in just about every communication with customers, whether it’s on your website, your email, your social media posts, or your paid ads.

If you plan to write your own copy it’s important to study copy writing and marketing techniques, concentrating on direct-response marketing. And there is a ton of free information out there from groups like American Writers and Artists Inc. and Copyblogger.com. You can also hire copywriters through sites like Upwork.com

Of course, even if you do hire a copywriter, it’s best to know copy writing yourself at some level for quality control.

See Also: 3 Ways to Make Email Automation Work for Your Online Business

Putting It All Together

This has been a crash course in starting your own online business from scratch. It may seem like an intimidating process. It doesn’t have to be.

This will take some time and effort. You’ll have to make some tough choices along the way. But the trick is to do a little bit each day - that way you don’t get overwhelmed. Take it one step at a time and spend at least an hour each day working on something. But be sure to go in order. Find your market, then your product or products… then build your site and start marketing.

Just keep continually working toward your goal of having a profitable online business… and you’ll get there. This is not a race. You want to build a solid foundation for a business that will last and bring in income for years to come.

Once you've gotten your online business started, the next step will be driving massive amounts of traffic to your new website.

How Do I Invest In Mutual Funds? These Days, Investing In Mutual Funds Couldn't Be Easier Or More Affordable

How Do I Invest In Mutual Funds?

These Days, Investing In Mutual Funds Couldn't Be Easier Or More Affordable

         I was once asked how to invest in mutual funds and I could not refrain from replying with “send a check to a mutual fund company.”  All jokes aside, there are some important considerations an investor should take into account before investing in a mutual fund because mutual funds come in a multitude of varieties including those that focus on different asset classes, those that seek to mimic an index (also known as index funds), those that focus on dividend stocks; the list goes on and on covering everything from geographic mandates to those that specialize in investing in securities that fall within a certain market capitalization.

1. What Is a Mutual Fund?

As with any investment, the first order of business is to understand what it is that you are considering acquiring.  For all intents and purposes, mutual funds serve as an alternative for investors who can't afford an individually managed account.  Mutual funds are formed when smaller investors pool their money together and then hire a portfolio manager to run the consolidated pool's portfolio, buying different stocks, bonds, or other securities in a manner consistent with the fund's prospectus.  Each investor then gets their respective piece of the pie while sharing the expenses, which show up in something called the mutual fund expense ratio.  Mutual funds can be structured in several different ways; open-ended mutual funds vs closed mutual funds being one particularly important distinction.  To learn more about the way mutual funds are organized, read How a Mutual Fund Is Structured.

 You may also want to read Making Money from Mutual Funds, which explains how investors actually profit (or experience losses) from owning a stake in a mutual fund.

2. How Do I Select a Mutual Fund?

This is where you will want to focus your attention.  The number of mutual funds available to investors now rivals the number of stocks on the North American exchanges.

  All of these mutual funds can be categorized based on the type of underlying securities held by the mutual fund.  At the broadest level, a fund will fall into one of three categories, equity (stocks), fixed income (bonds), and money markets (similar to cash).  Equity and fixed income funds have subcategories, which will allow an investor to get specific with their investment dollars.  For example, an equity fund investor may invest in a technology fund, which only invests in technology companies.  Likewise a bond fund investor who is seeking current income may invest in a government securities fund which only invests in government securities.  A so-called balanced fund is a mutual fund that owns both stocks and bonds.

Risk is an important consideration when evaluating mutual funds.  As an investor, you should make every effort to understand how much risk you are willing to take and then seek a fund that falls within your risk tolerance.  Naturally, you are investing with some objective in mind, so narrow down your list of candidates by concentrating on funds that meet your investment needs while staying within your risk parameters.

Furthermore, check to see what the minimum amount is to invest in a fund.

  Some funds will have different minimum thresholds depending on whether it is a retirement account or non-retirement account.

3. Buying a Mutual Fund

The process of how to buy shares of a mutual fund is covered in-depth in How Do I Buy Shares of a Mutual Fund? but the summary version is this: Mutual funds are primarily bought in dollar amounts unlike stocks, which are bought in shares.  Mutual funds can be purchased directly from a mutual fund company, a bank or a brokerage firm.  Before you can invest you will need to have an account with one of these institutions prior to placing an order.  A mutual fund will be either a “load” or “no load” fund, which is financial jargon for either paying a commission or not paying a commission.

  If you are using an investment professional to assist you, you are likely to pay a load.  Understand that a “no load” fund is not free.  All mutual funds have internal expenses, which is to say that part of your investment dollars go to pay the fund company, the fund manager and other fees associated with running a mutual fund.  These fees are often transparent to the investor and are taken out of the assets of the mutual fund.  You should consider all fees and charges when investing in mutual funds

The process of buying a mutual fund can be done over the phone, online or in person if you are dealing with a financial representative.  To place an order, you would indicate how much money you want to invest and what mutual fund you want to purchase.  All mutual fund investors get the funds closing price on the day they place their order.

This article was written by Marc Pearlman in May 2011.  It was subsequently edited for formatting and clarity by Joshua Kennon.  The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.

Investing in Bonds versus Bond Funds

Individual Bonds and Bond Funds Each Have Their Own Advantages and Disadvantages

Investing in bonds, including corporate bond and municipal bonds, is one of the long-established foundations of any good diversified portfolio.  Even in times of low interest rates, bonds provide a bulwark against stock market and real estate crashes, while throwing off interest income.  Academic studies going back over the past century demonstrate that even a small fixed income component, grounded in highly rated bonds, can significantly reduce volatility without subtracting too much return from the overall portfolio.

While investing in individual bonds is certainly possible, that may not be advisable unless you have at least a six-figure portfolio.  For smaller investors, there is an alternative: A bond mutual fund, or bond fund as it is more commonly called.

When most investors discuss mutual funds, they are often talking about professionally managed investment funds that invest in stocks, commonly in the form of an index.  Bond funds, in contrast, pool money from investors to purchase bonds, gaining diversification that would otherwise not be possible for the non-wealthy.  Some bond funds specialize in corporate bonds, others in municipal bonds, still others in junk bonds.  In fact, the odds are if you want to own a specific type of bond, there is a bond fund that will let you do it with as little as a few hundred, or perhaps even a few thousand, dollars.

The Benefits of Investing in Bond Funds

There are several advantages to investing in bond funds.

They include:

• Bond funds typically pay higher interest rates than certificates of deposit,money market funds, and bank accounts.
• Ordinarily, it would be impossible for small investors to put together a diversified bond portfolio because bonds must be purchased in much larger denominations than stocks - sometimes $1,000, $5,000, $10,000, $25,000 or more depending upon the issuer.  This isn't a problem because bond funds trade in smaller share prices, making diversification possible or those with only a few thousand dollars, reducing risk.

• Investors can get the benefit of professional money managers that know their field.  It wouldn't be worth the time or effort for the average person to learn the different rules for municipal bonds, for instance, such as the substantial differences between General Obligation Bonds and Revenue Bonds.  Owning bond funds makes the point moot because the fund manager is responsible for such day-to-day research.
• Bond funds typically receive better pricing than the small investor on the bonds acquired bonds.  Unlike the stock market where the bid and ask are clearly disclosed, you may not know how much of a markup your brokerage firm puts on a bond.  The "spread", as it is known, between what the buyer pays and what the seller receives on a specific bond can be huge when purchasing individual issues.  Due to their size, scale, and willingness to take large positions, bond funds are going to have much better odds of achieving attractive pricing.
• Investing in bond funds is much, much easier than owning individual bonds outright because you don't have to take care of "laddering" your portfolio (that is, managing the maturity date of different bonds), recording each individual interest check as it comes in or is deposited into your brokerage account, or dealing with special situations such as bonds that are called by the company - that is, the company forces you to sell it back to them based on the original bond agreement.  With bond funds, all of that is taken care of at the managing company.  You simply get your regular distributions of profit from the bond holdings and that it.

• Many bond funds pay out interest and gains monthly instead of semi-annually, as is the case with individual bonds.  This makes cash flow much less stressful for income-oriented investors who need more frequent deposits for day-to-day bills.

The Drawbacks of Investing in Bond Funds

Like all things in life, there's always a bit of sour to go with the sweet and bond funds are no exception. Despite all of the benefits mentioned above, there are several drawbacks to investing exclusively through bond funds rather than acquiring your own individual bonds.  These drawbacks include:

• Bond funds typically have higher expense ratios, meaning that more of each dollar goes to management fees than a comparable stock mutual fund.
• With an individual bond, risk decreases the longer you hold the security because you get closer to maturity when you receive your principal back from the company or organization to whom you lent it.  This is not true with bond funds because the individual holdings are constantly maturing, being bought and sold, etc.
• In the case of aggressive management, bond funds can take on leverage.  If you don't pay attention to this, you might be exposed to significant potential capital losses and not even know it.  Generally speaking, it is highly inappropriate for average investors to own leveraged bond funds and they should be avoided like the plague if you have any sense of reasonable risk management.
• Monthly income from bond funds fluctuates as the underlying bond assets change.  You won't know precisely how much you are going to collect in any given year.
• Some bond funds charge redemption fees if you sell your shares within a certain time period (say, 60 or 90 days).
• Certain bond funds may have sales loads, which are essentially fees and commissions to the fund company or financial institution that sold you the investment.

Should You Consider Investing in a Bond Fund for Your Family's Portfolio?

The truth of the matter is that there is no right or wrong answer when it comes to investing bond funds. Bond funds make sense for those who have less than $100,000 to devote to their fixed income portfolio or for those who simply want the convenience of buying and selling a basket of bonds with a single transaction.

The Beginner's Guide to Investing in Mutual Funds

What Mutual Funds Are, How Mutual Funds Work, and Much More

Mutual funds are one of the most popular ways for new investors to build wealth. Whether you own them through your retirement plan, such as a 401(k) or IRA, or you buy them directly or through a brokerage account, this guide to mutual fund investing was designed to help you understand what they are, how they work, and things you may want to consider.

1

 Mutual Funds 101

Before I can teach you about mutual fund investing, you need to understand what mutual funds are. In Mutual Funds 101, I'm going to show you the difference between open-ended funds and closed funds, load vs. no load funds, and more. It's a great place to start. 

The brain-child of Wall Street, mutual funds are perhaps the easiest and least stressful way to invest in the market. In fact, more new money has been introduced into funds during the past few years than at any time in history. Before you jump into the pool and select a mutual fund in which to invest, you should know exactly what they are and how they work. As part of our Complete Beginner's Guide to Investing in Mutual Funds special, this article can give you the foundation you need to start understanding mutual fund investing.

What is a mutual fund?

Put simply, a mutual fund is a pool of money provided by individual investors, companies, and other organizations. A fund manager is hired to invest the cash the investors have contributed. The goal of the manager depends on the type of fund; a fixed-income fund manager, for example, would strive to provide the highest yield at the lowest risk. A long-term growth manager, on the other hand, should attempt to beat the Dow Jones Industrial Average or the S&P 500 in a fiscal year (very few funds actually achieve this; to find out why, read Index Funds - The Dumb Money Almost Always Wins).

Closed vs. Open-Ended Funds, Load vs. No-Load

Mutual funds are divided along four lines: closed-end and open-ended funds; the latter is subdivided into load and no load.

• Closed-End Funds
  This type of fund has a set number of shares issued to the public through an initial public offering. These shares trade on the open market; this, combined with the fact that a closed-end fund does not redeem or issue new shares like a normal mutual fund, subjects the fund shares to the laws of supply and demand. As a result, shares of closed-end funds normally trade at a discount to net asset value.

• Open-End Funds
  A majority of mutual funds are open-ended. In simple terms, this means that the fund does not have a set number of shares. Instead, the fund will issue new shares to an investor based upon the current net asset value and redeem the shares when the investor decides to sell. Open-end funds always reflect the net asset value of the fund's underlying investments because shares are created and destroyed as necessary.
  Load vs. No Load
  A load, in mutual fund speak, is a sales commission. If a fund charges a load, the investor will pay the sales commission on top of the net asset value of the fund’s shares. No load funds tend to generate higher returns for investors due to the lower expenses associated with ownership.
  
  

What are the benefits of investing in a mutual fund?

Mutual funds are actively managed by a professional money manager who constantly monitors the stocks and bonds in the fund's portfolio. Because this is his or her primary occupation, they can devote considerably more time to selecting investments than an individual investor. This provides the peace of mind that comes with informed investing without the stress of analyzing financial statements or calculating financial ratios.

How do I select a fund that's right for me?

Every fund has a particular investing strategy, style or purpose; some, for instance, invest only in blue chip companies. Others invest in start-up businesses or specific sectors. Finding a mutual fund that fits your investment criteria and style is absolutely vital; if you don't know anything about biotechnology, you have no business investing in a biotech fund. You must know and understand your investment.

After you’ve settled on a type of fund, turn to Morning star or Standard and Poors (S&P). Both of these companies issue fund rankings based on past record. You must take these rankings with a grain of salt. Past success is no indication of the future, especially if the fund manager has recently changed.

How do I begin investing in a fund?

If you already have a brokerage account, you can purchase mutual fund shares as you would a share of stock. If you don't, you can visit the fund's web page or call them and request information and an application. Most funds have a minimum initial investment which can vary from $25 - $100,000+ with most in the $1,000 - $5,000 range (the minimum initial investment may be substantially lowered or waived altogether if the investment is for a retirement account such as a 401k,traditional IRA or Roth IRA, and / or the investor agrees to automatic, reoccurring deductions from a checking or savings account to invest in the fund.

The importance of dollar-cost averaging

The dollar-cost averaging strategy is just as applicable to mutual funds as it is to common stock. Establishing such a plan can substantially reduce your long-term market risk and result in a higher net worth over a period of ten years or more.

2

 How a Mutual Funds Works

As part of my decision to seriously consider launching a mutual fund company, I met with banks and other financial institutions, who provided a phenomenal introduction to how mutual funds are structured and the way they actually work. By giving you a behind-the-scenes look into the makeup of a fund, you'll have a much better idea what happens once you write a check to start investing.

How a Mutual Fund is Structured

An Explanation of What You are Buying When You Invest In a Mutual Fund

I recently investigated the process of starting a mutual fund.  As I've been meeting with fund companies and banks, I've learned a tremendous amount about how mutual funds are structured, including the arrangements that make funds work on a day-to-day basis. I thought it would be a great opportunity to share this knowledge with you so you can actually look at the man behind the curtain and see how your money moves once you've put it into a mutual fund.

By better understanding it, I hope that the idea of investing in mutual funds won't be so daunting for you as a new investor.

The Background on Mutual Funds

As I explained in Mutual Funds 101, which is part of our Complete Beginner's Guide to Investing in Mutual Funds, mutual funds are the most popular investment in the United States because they provide a way for everyday people to buy a broadly diversified portfolio of stocks, bonds, or other securities. There are mutual funds to match virtually any need, from finding a place to store your temporary cash savings to earning dividends and capital gains on long-term global stocks. This convenience has lead to explosive growth in the mutual fund industry. Money market funds had nearly $3.3 trillion dollars in assets in them as of the end of fiscal 2009. As of the end of November 2009, long-term mutual funds had just shy of $11 trillion in assets.

This is a massive industry and one which is important to you regardless of if you invest through a 401(k), 403(b), Roth IRA, Traditional IRA, SEP-IRA, Simple IRA, or brokerage account. According to some estimates, 1 out of every 2 American households owns mutual funds.

The Mutual Fund Company

A mutual fund is organized as a regular corporation or a trust, depending on which method the founders prefer.

If the fund agrees to pay out all of its dividend, interest, and capital gains profits to shareholders, the IRS won't make it pay corporate taxes (this is called "pass-through taxation" and helps you avoid the double layer of taxation that is ordinarily present when buying shares of stock).

The mutual fund itself consists of only a few things:

• A Board of Directors or Board of Trustees: If the company is a corporation, the people who watch over it for the shareholders are known as directors and serve on a Board of Directors. If it is a trust, they are known as trustees and serve on a Board of Trustees. For all intents and purposes, there is no difference between the two roles. According to rules set by law, at least 75% of the directors must be disinterested, meaning they have no relationship to the person or firm that will actually manage the money. The directors will be paid for their service. At major, multi-billion dollar mutual funds, they may receive as much as $250,000 a year!
• The cash, stocks, and bonds the fund holds: The actual stocks, bonds, cash, and other assets the mutual fund holds.
• Contracts: The fund itself has no employees, just contracts with other firms. These contracts will include custody (that is a bank that will hold all of the cash, bonds, stocks, or assets the fund owns in exchange for a fee), transfer agent (the people who keep track of your purchases and sales of the mutual fund shares, make sure you get your dividend checks and send you your account statements, audit and accounting, which will be the firm that will come in and verify the money is present and the mutual fund is worth what it says in the newspaper every day when the value is determined, and the investment management, or investment adviser, company. This is the company that actually manages the money and makes buy, sell, or hold decisions. The investment management company is paid a percentage of the assets, say 1.5%, in exchange for this service. They can be fired by the mutual fund's board of directors with very little notice and replaced.

How the Mutual Fund Process Works

Let's say you have $10,000 you want to invest in XYZ Fund. You download a new account application from the mutual fund's website, fill it out, and mail it in along with a check. A few days later, your account is open.

Here's a simplified explanation of what will happen:

1. Your check was mailed to the transfer agent. It was deposited into a bank or custody account. They will make sure you are issued shares of the mutual fund based on the value of the fund when your check was deposited.
2. The cash will show up in the account, and will be visible to the portfolio manager that represents the adviser company. They will get a report telling them how much money is available to invest in additional stocks, bonds, or other securities based on the net money coming into or out of the fund.

1. When the portfolio manager is ready to buy shares of a stock such as Coca-Cola, he will tell his trading department to make sure the order gets filled. They will work with stock brokers, investment banks, clearing networks, and other sources of liquidity to find the stock and get their hands on it at the lowest possible price.
2. When the trade is agreed upon, a few days will pass until the settlement date. On this date, the mutual fund will have the money taken out of its bank account and give it to the person or institution that sold the shares of Coke to them in exchange for the Coke stock certificates, making them the new owner. These shares are stored either physically or electronically with the custodian.
3. When Coca-Cola pays a dividend, it will send the money to the custodian, who will make sure it is credited to the mutual fund's account.
4. The mutual fund will likely hold the money in cash so it can pay them out to you as a dividend at the end of the year.

How Is the Mutual Fund Portfolio Manager Paid?

You may wonder how the mutual fund manager is paid for picking stocks since he or she doesn't actually work for the fund but has a contract to manage the money. If they are paid a fee of 1.5% per year, they would get 1/365th of 1.5% each day, based on the weighted average assets of the fund. The money is taken from the mutual fund's cash account and deposited into the adviser's account each day.

3

 How Do I Buy Shares of a Mutual Fund?

once you a ready to begin investing in mutual funds, you actually have to go about buying your mutual fund shares.  There are three popular ways this is done in the United States.  This overview will help you understand each of them, and some of the advantages certain methods have over others. 

4

 What Is a Mutual Fund Sales Load?

When you buy your first mutual fund, you may encounter something known as a sales load.  There are front end loads, back end loads, deferred loads and declining loads.  That may sound complicated, but it is really important you understand what these terms mean because buying the wrong type of mutual fund can take thousands, or even tens of thousands, of dollars directly out of your pocket. 

What Is a Mutual Fund Sales Load?

How Do Sales Loads Work and Should I Pay Them?

A friend of mine once asked me a few questions about working with a new stock broker. Long story short, he and his girlfriend had moved across the country and visited their local branch office of one of the biggest investment firms in the United States. He was presented with a suggested portfolio but the new broker mentioned that all of his mutual fund purchases would have a "five percent sales load" on them.

After their meeting, my friend contacted me and wanted to know what a mutual fund sales load was, whether or not he should be concerned, and if a 5% sales load was too high, too low, or fair.  

These were great questions and ones every new investor will someday ask.  To help you better understand mutual fund sales loads, I am going to provide a brief overview of what they are, why they exist, and how you should handle them if you are confronted with the possibility of having to pay one to your stock broker.

A Mutual Fund Sales Load Is a Type of Commission

Money management companies, including mutual fund companies, make money by piling up assets and charging a fee each year. To get stock brokers to sell their fund instead of the thousands of funds offered by competitors, some mutual funds try to sweeten the broker's compensation deal by offering to pay the broker a percentage of everything they get their clients to invest in their fund.

This is called a "load" or "sales load". A successful broker could make hundreds of thousands of dollars just from selling you investment products and not from his or her performance. It is a skewed incentive system that doesn't favor you, the investor.

Even worse, the sales load doesn't come out of the mutual fund company's pocket.

It comes directly out of your investment!

The Two Types of Mutual Fund Sales Loads

There are two types of mutual fund sales loads - front end sales loads and back end sales loads (also called deferred sales loads).

• Front End Sales Loads: These are marketing fees paid up front at the time of the investment. If you invest $100,000 into a mutual fund with a 5% sales load, when you make the investment, $5,000 will be taken out of your account and used to pay the broker and other distributors that helped get you to choose that investment. That means you will begin with only $95,000 in money working for you. Over time, that can make a big difference. If your mutual fund grew by 8% compounded for 50 years, that $5,000 sales load charge would result in you having $234,508 in less wealth.
• Back End Sales Loads or Deferred Sales Loads: These are marketing fees paid when you sell the investment. That way, all of your money is working for you from the beginning, meaning more compounding if you selected a successful mutual fund or other investment product. It still takes a bite out of your holdings but it is less onerous over the long-run than front end sales loads. The back end sales load is calculated in almost all cases off the initial investment made, not the ultimate value of the holding when you sell your position.
  Some mutual fund back end sales loads have a declining feature. This means that with each passing year, you would be forgiven from paying a portion of the sales load if you were to sell your investment. In most cases, a declining back end sales load would result in you owning no sales load at all if you held the investment for seven years or longer, which can encourage long-term thinking. You need to read the mutual fund prospectus, though, to find out the details of your specific holdings.

What should be clear to you is that a mutual fund sales load results in less money in your pocket in most cases. That leads us to one of the most important rules of mutual fund investing: You should probably never buy a mutual fund that has a sales load.

You Should Probably Never Buy a Mutual Fund with a Sales Load

As a general rule, you should avoid mutual funds with sales loads attached to them. That is purely a marketing expense. You are literally taking out your checkbook and writing it to pay a commission that the mutual fund company doesn't want to pay itself! That means you lose all of the dividends, interest and capital gains you might have otherwise made on that money.

Companies such as Vanguard and Fidelity have made no-load funds the virtual norm for do-it-yourself investors. 

5

 Are Low-Cost Index Funds the Best Mutual Fund Investment?

Many professionals believe that low-cost index funds are a better investment choice for those who want to grow their wealth without a lot of hassle. How are index funds different? Should you consider investing in them instead of actively managed mutual funds? Here are some thoughts that you might want to consider. 

Investing in Low-Cost Index Funds

As you work your way through our Beginner's Guide to Investing in Mutual Funds, you may wonder which you should choose: actively managed mutual funds or passively managed mutual funds.

According to the folks at the Motley Fool, only ten of the ten thousand actively manages mutual funds available managed to beat the S&P 500 consistently over the course of the past ten years. History tells us that very few if any of these funds will manage the same feat in the decade to come.

The lesson is simple: Unless you are convinced you are capable of selecting the 0.001% of mutual funds that are going to beat the broad market, you would best be served by investing in the market itself.

How? By beginning a dollar cost averaging plan into low-cost index funds, you can be absolutely certain you will out-perform a majority of managed mutual funds on a long-term basis.

Indeed, the most successful investor in history, Warren Buffett, advocates that those unwilling or unable to intelligently evaluate individual stocks should invest in a low-cost index fund such as those offered by Vanguard.

Why? Index funds boast three distinct advantages over their actively-managed counterparts:

• They do not require corporate analysis or an understanding of accounting, financial theory, or portfolio policy.
• They have almost non-existent expense ratios, providing a significant competitive edge over actively managed funds and almost completely ensuring superior long-term performance.

• They are made up of dozens or hundreds of companies. This diversification reduces company-specific risk.

What Is An Index Fund?

An index fund is a mutual fund designed to mirror the performance of one of the major indices (e.g., the Dow Jones Industrial Average, S&P 500, Wilshire 5000, Russell 2000, etc.) Unlike traditional, actively managed mutual funds where portfolio managers evaluate, analyze and acquire individual stocks, index funds are passively managed.

Basically, this means they consist of a pre-selected group of stocks that rarely, if ever, changes.

An investor that bought an index fund designed to mirror the DJIA, for example, would experience price movements almost perfectly in sync with the quoted value of the Dow Jones Industrial Average he hears on the nightly news. Likewise, an investor who built a position in an index fund designed to mimic the S&P 500 is, in essence, acquiring stock in all five hundred of the companies that make up that index.

Index Funds Don't Require Corporate and Financial Analysis

Index funds are ideal for those who have no idea how to evaluate competitive advantages of various corporations, differentiate an income statement from a balance sheet, or calculate discounted cash flows. Because company-specific risk is diversified away thanks to the dozens or hundreds of companies that make up each of the major indices, such analysis is not necessary. In addition, an index fund is a cost effective way to acquire hundreds of stocks while avoiding the thousands of dollars in brokerage commissions that would otherwise result.

Index Funds Generally Have the Lowest Mutual Fund Expense Ratios

Actively managed mutual funds must pay portfolio managers, analysts, research subscription fees and the like.

The percentage of a fund's total expenses including its 12 b-1 fees divided by its average net assets is known as the expense ratio. Because index funds are non-managed (and require none of the aforementioned expenses), the expense ratio is almost nill compared to the average mutual fund. This means that less of the investor's money goes to paying overhead, compensation and sales charges. Over the long-run, the lower costs associated with index funds can result in significantly improved performance.

Consider the following: A quick glance at Yahoo Finance reveals the average expense ratio for growth and income style mutual funds is 1.29%.

As a result, approximately $1,883 of every $10,000 invested over the course of ten years will go to the fund company in the form of expenses. Compare that to the Vanguard 500 fund, designed to mirror the S&P 500 index, which boasts an annual expense ratio of only 0.12%, resulting in ten-year compounded expense of $154 for every $10,000 invested. In other words, by investing in the Vanguard fund, the investor will have $1,724 more working for him. Compounded over an investing lifetime, the difference is significant.

Index Fund Investing Works Best When Paired With Long-Term Dollar Cost Averaging

At the height of the roaring stock market of the 1920's, the Dow Jones Industrial Average reached a peak of 381.17. In 1932, the Dow crashed to 42.22. It took over thirty-three years (1929 to 1955) for it to return to the 1929 level. An individual investing all of his money at the height would have waited more than three decades to merely break even! If, however, he had started a dollar cost averaging program, he would have made a tremendous amount of money thanks to his significantly lower average cost basis by the time the market returned to its previous level. Combined with reinvested dividends, he would have broken even in only a few years, and by the time the market reached its former level, have done very well.

6

 10-Part Guide to Picking the Best Mutual Funds

How do you pick the best mutual funds? I wrote this step-by-step guide to illustrate some of the things to think about and look for when building a mutual fund portfolio. It should be useful as you make your way through what can seem like an endless list of potential fund investment

7

 Don't Forget to Watch Out for this Huge Hidden Mutual Funds Tax!

There is a hidden mutual fund tax that could cause you to owe massive amounts of money to the IRS even if you lose money investing in a mutual fund. Most new investors don't know how it works, or even what to look for to spot this potential danger. Don't even consider mutual fund investing until you've learned the cause of potential mutual fund tax problems

8

 Don't Chase Past Mutual Funds Performance

Do you think it is a good idea to only buy shares of mutual funds that have good past performance? That may sound reasonable but your logic is flawed. Mutual funds are a unique type of investment. For example,portfolio managers change even though the fund name remains the same! If someone new is managing your money, you may not even realize it. Likewise, fund assets grow, making it more difficult to put money to work as the universe of potential investments shrinks.

 

9

 Should I Invest in Bonds or a Bond Fund?

Investing in bonds, including corporate bonds and municipal bonds, is one of the long-established foundations of any good diversified portfolio.  Even in times of low interest rates, bonds provide a bulwark against stock market and real estate crashes, while throwing off interest income.  Academic studies going back over the past century demonstrate that even a small fixed income component, grounded in highly rated bonds, can significantly reduce volatility without subtracting too much return from the overall portfolio.

While investing in individual bonds is certainly possible, that may not be advisable unless you have at least a six-figure portfolio.  For smaller investors, there is an alternative: A bond mutual fund, or bond fund as it is more commonly called.

When most investors discuss mutual funds, they are often talking about professionally managed investment funds that invest in stocks, commonly in the form of an index.  Bond funds, in contrast, pool money from investors to purchase bonds, gaining diversification that would otherwise not be possible for the non-wealthy.  Some bond funds specialize in corporate bonds, others in municipal bonds, still others in junk bonds.  In fact, the odds are if you want to own a specific type of bond, there is a bond fund that will let you do it with as little as a few hundred, or perhaps even a few thousand, dollars.

The Benefits of Investing in Bond Funds

There are several advantages to investing in bond funds.

They include:

• Bond funds typically pay higher interest rates than certificates of deposit,money market funds, and bank accounts.
• Ordinarily, it would be impossible for small investors to put together a diversified bond portfolio because bonds must be purchased in much larger denominations than stocks - sometimes $1,000, $5,000, $10,000, $25,000 or more depending upon the issuer.  This isn't a problem because bond funds trade in smaller share prices, making diversification possible or those with only a few thousand dollars, reducing risk.

• Investors can get the benefit of professional money managers that know their field.  It wouldn't be worth the time or effort for the average person to learn the different rules for municipal bonds, for instance, such as the substantial differences between General Obligation Bonds and Revenue Bonds.  Owning bond funds makes the point moot because the fund manager is responsible for such day-to-day research.
• Bond funds typically receive better pricing than the small investor on the bonds acquired bonds.  Unlike the stock market where the bid and ask are clearly disclosed, you may not know how much of a markup your brokerage firm puts on a bond.  The "spread", as it is known, between what the buyer pays and what the seller receives on a specific bond can be huge when purchasing individual issues.  Due to their size, scale, and willingness to take large positions, bond funds are going to have much better odds of achieving attractive pricing.
• Investing in bond funds is much, much easier than owning individual bonds outright because you don't have to take care of "laddering" your portfolio (that is, managing the maturity date of different bonds), recording each individual interest check as it comes in or is deposited into your brokerage account, or dealing with special situations such as bonds that are called by the company - that is, the company forces you to sell it back to them based on the original bond agreement.  With bond funds, all of that is taken care of at the managing company.  You simply get your regular distributions of profit from the bond holdings and that it.

• Many bond funds pay out interest and gains monthly instead of semi-annually, as is the case with individual bonds.  This makes cash flow much less stressful for income-oriented investors who need more frequent deposits for day-to-day bills.

The Drawbacks of Investing in Bond Funds

Like all things in life, there's always a bit of sour to go with the sweet and bond funds are no exception. Despite all of the benefits mentioned above, there are several drawbacks to investing exclusively through bond funds rather than acquiring your own individual bonds.  These drawbacks include:

• Bond funds typically have higher expense ratios, meaning that more of each dollar goes to management fees than a comparable stock mutual fund.

• With an individual bond, risk decreases the longer you hold the security because you get closer to maturity when you receive your principal back from the company or organization to whom you lent it.  This is not true with bond funds because the individual holdings are constantly maturing, being bought and sold, etc.
• In the case of aggressive management, bond funds can take on leverage.  If you don't pay attention to this, you might be exposed to significant potential capital losses and not even know it.  Generally speaking, it is highly inappropriate for average investors to own leveraged bond funds and they should be avoided like the plague if you have any sense of reasonable risk management.
• Monthly income from bond funds fluctuates as the underlying bond assets change.  You won't know precisely how much you are going to collect in any given year.
• Some bond funds charge redemption fees if you sell your shares within a certain time period (say, 60 or 90 days).
• Certain bond funds may have sales loads, which are essentially fees and commissions to the fund company or financial institution that sold you the investment.

Should You Consider Investing in a Bond Funds for Your Family's Portfolio?

The truth of the matter is that there is no right or wrong answer when it comes to investing bond funds. Bond funds make sense for those who have less than $100,000 to devote to their fixed income portfolio or for those who simply want the convenience of buying and selling a basket of bonds with a single transaction.

10

 Are ETFs a Better Choice Than Traditional Mutual Funds?

You may have heard a lot about ETFs in the financial press lately, especially comparing them to traditional mutual funds. Exchange traded funds do have a lot of benefits, but there are also some drawbacks you need to know about before you make the switch.