Mutual Funds- Learn to make money

A mutual fund is a professionally-managed firm of collective investments that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities.[1] In a mutual fund, the fund manager, who is also known as the portfolio manager, trades the fund's underlying securities, realizing capital gains or losses, and collects the dividend or interest income. The investment proceeds are then passed along to the individual investors. The value of a share of the mutual fund, known as the net asset value per share (NAV), is calculated daily based on the total value of the fund divided by the number of shares currently issued and outstanding. Legally known as an "open-end company" under the Investment Company Act of 1940 (the primary regulatory statute governing investment companies), a mutual fund is one of three basic types of investment companies available in the United States.[2] Outside of the United States (with the exception of Canada, which follows the U.S. model), mutual fund may be used as a generic term for various types of collective investment vehicle. In the United Kingdom and western Europe (including offshore jurisdictions), other forms of collective investment vehicle are prevalent, including unit trusts, open-ended investment companies (OEICs), SICAVs and unitized insurance funds. In Australia and New Zealand the term "mutual fund" is generally not used; the name "managed fund" is used instead.

Types of mutual funds

• Open-end fund
• Exchange-traded funds
• Equity funds
• Capitalization
• Growth vs. value
• Index funds versus active management
• Bond funds
• Money market funds
• Funds of funds
• Hedge Fund

Types of mutual funds

Open-end fund

The term mutual fund is the common name for an open-end investment company. Being open-ended means that, at the end of every day, the fund issues new shares to investors and buys back shares from investors wishing to leave the fund. Mutual funds may be legally structured as corporations or business trusts but in either instance are classed as open-end investment companies by the SEC. Other funds have a limited number of shares; these are either closed-end funds or unit investment trusts, neither of which is a mutual fund.

Exchange-traded funds

A relatively recent innovation, the exchange traded fund (ETF), is often formulated as an open-end investment company. ETFs combine characteristics of both mutual funds and closed-end funds. An ETF usually tracks a stock index (see Index funds). Shares are issued or redeemed by institutional investors in large blocks (typically of 50,000). Investors typically purchase shares in small quantities through brokers at a small premium or discount to the net asset value; this is how the institutional investor makes its profit. Because the institutional investors handle the majority of trades, ETFs are more efficient than traditional mutual funds (which are continuously issuing new securities and redeeming old ones, keeping detailed records of such issuance and redemption transactions, and, to effect such transactions, continually buying and selling securities and maintaining liquidity position) and therefore tend to have lower expenses. ETFs are traded throughout the day on a stock exchange, just like closed-end funds. Exchange traded funds are also valuable for foreign investors who are often able to buy and sell securities traded on a stock market, but who, for regulatory reasons, are unable to participate in traditional US mutual funds.

Equity funds

Equity funds, which consist mainly of stock investments, are the most common type of mutual fund. Equity funds hold 50 percent of all amounts invested in mutual funds in the United States. Often equity funds focus investments on particular strategies and certain types of issuers.

Capitalization

Fund managers and other investment professionals have varying definitions of mid-cap, and large-cap ranges. The following ranges are used by Russell Indexes:

• Russell Microcap Index - micro-cap ($54.8 - 539.5 million)
• Russell 2000 Index - small-cap ($182.6 million - 1.8 billion)
• Russell Midcap Index - mid-cap ($1.8 - 13.7 billion)
• Russell 1000 Index - large-cap ($1.8 - 386.9 billion)

Growth vs. value

Another distinction is made between growth funds, which invest in stocks of companies that have the potential for large capital gains, and value funds, which concentrate on stocks that are undervalued. Value stocks have historically produced higher returns; however, financial theory states this is compensation for their greater risk. Growth funds tend not to pay regular dividends. Income funds tend to be more conservative investments, with a focus on stocks that pay dividends. A balanced fund may use a combination of strategies, typically including some level of investment in bonds, to stay more conservative when it comes to risk, yet aim for some growth.

Index funds versus active management

An index fund maintains investments in companies that are part of major stock (or bond) indices, such as the S&P 500, while an actively managed fund attempts to outperform a relevant index through superior stock-picking techniques. The assets of an index fund are managed to closely approximate the performance of a particular published index. Since the composition of an index changes infrequently, an index fund manager makes fewer trades, on average, than does an active fund manager. For this reason, index funds generally have lower trading expenses than actively managed funds, and typically incur fewer short-term capital gains which must be passed on to shareholders. Additionally, index funds do not incur expenses to pay for selection of individual stocks (proprietary selection techniques, research, etc.) and deciding when to buy, hold or sell individual holdings. Instead, a fairly simple computer model can identify whatever changes are needed to bring the fund back into agreement with its target index.

The performance of an actively managed fund largely depends on the investment decisions of its manager. Statistically, for every investor who outperforms the market, there is one who underperforms. Among those who outperform their index before expenses, though, many end up underperforming after expenses. Before expenses, a well-run index fund should have average performance. By minimizing the impact of expenses, index funds should be able to perform better than average. Certain empirical evidence seems to illustrate that mutual funds do not beat the market and actively managed mutual funds under-perform other broad-based portfolios with similar characteristics. One study found that nearly 1,500 U.S. mutual funds under-performed the market in approximately half of the years between 1962 and 1992. Moreover, funds that performed well in the past are not able to beat the market again in the future (shown by Jensen, 1968; Grimblatt and Sheridan Titman, 1989

Bond funds

Bond funds account for 18% of mutual fund assets. Types of bond funds include term funds, which have a fixed set of time (short-, medium-, or long-term) before they mature. Municipal bond funds generally have lower returns, but have tax advantages and lower risk. High-yield bond funds invest in corporate bonds, including high-yield or junk bonds. With the potential for high yield, these bonds also come with greater risk.

Money market funds

Money market funds hold 26% of mutual fund assets in the United States. [10] Money market funds entail the least risk, as well as lower rates of return. Unlike certificates of deposit (CDs), money market shares are liquid and redeemable at any time. The interest rate quoted by money market funds is known as the 7 Day SEC Yield.

Funds of funds

Funds of funds (FoF) are mutual funds which invest in other underlying mutual funds (i.e., they are funds comprised of other funds). The funds at the underlying level are typically funds which an investor can invest in individually. A fund of funds will typically charge a management fee which is smaller than that of a normal fund because it is considered a fee charged for asset allocation services. The fees charged at the underlying fund level do not pass through the statement of operations, but are usually disclosed in the fund's annual report, prospectus, or statement of additional information. The fund should be evaluated on the combination of the fund-level expenses and underlying fund expenses, as these both reduce the return to the investor.

Most FoFs invest in affiliated funds (i.e., mutual funds managed by the same advisor), although some invest in funds managed by other (unaffiliated) advisors. The cost associated with investing in an unaffiliated underlying fund is most often higher than investing in an affiliated underlying because of the investment management research involved in investing in fund advised by a different advisor. Recently, FoFs have been classified into those that are actively managed (in which the investment advisor reallocates frequently among the underlying funds in order to adjust to changing market conditions) and those that are passively managed (the investment advisor allocates assets on the basis of on an allocation model which is rebalanced on a regular basis).

The design of FoFs is structured in such a way as to provide a ready mix of mutual funds for investors who are unable to or unwilling to determine their own asset allocation model. Fund companies such as TIAA-CREF, Vanguard, and Fidelity have also entered this market to provide investors with these options and take the "guess work" out of selecting funds. The allocation mixes usually vary by the time the investor would like to retire: 2020, 2030, 2050, etc. The more distant the target retirement date, the more aggressive the asset mix.

Hedge funds

Hedge funds in the United States are pooled investment funds with loose SEC regulation and should not be confused with mutual funds. Some hedge fund managers are required to register with SEC as investment advisers under the Investment Advisers Act. [11] The Act does not require an adviser to follow or avoid any particular investment strategies, nor does it require or prohibit specific investments. Hedge funds typically charge a management fee of 1% or more, plus a "performance fee" of 20% of the hedge fund's profits. There may be a "lock-up" period, during which an investor cannot cash in shares. A variation of the hedge strategy is the 130-30 fund for individual investors.

Adsense- Make money on net from Google

Let me start off by saying, any person who owns or is thinking about creating a website would be crazy to ignore this. Earning money with your site, no matter the topic, has become easier than it's ever been before.

If this program had been available in 2000, I would have NEVER shut down my soap opera fan site that received 200 hits per day.
I would have been able to earn money from that traffic and probably turned a small profit.
First of all,
Google.com earns most of its money by allowing other website owners to advertise on their search result pages. Now you can earn a share of the revenue that Google earns by placing these same text ads on your site.
In other words, you're helping Google advertise.
The program is called Adsense.

So if you are one of those people that don't like the idea of paying for a site, this is an excellent way to earn your money back and then some.

Even if you earned as little as $10 in a month, it would more than likely cover some or all of the costs for your web site. Perhaps you are simply looking for ways to add additional revenue to your website, then it's perfect for that situation too.

This program is getting so popular, people are creating websites just to display the ads and profit from Google's Adsense alone.

I don't usually like to use the term "easy money" because there really is no such thing. You still have to create your own website and learn how to bring in traffic in order to make good money with this program. I certainly don't want to make it sound like you get something for doing absolutely nothing.

However, I've got to say that Adsense is the closest I've ever come to "fast cash" on the Internet. It's almost like you're getting rewarded for having a website that receives traffic. What's even better...the program is completely free. You can add the ads to multiple websites and there is no limit to the amount you can earn.

How Adsense Works
If you go to Google.com and do a search for almost any keyword phrase, you'll notice some "Sponsored Links" that appear on the right side of the screen that are relevant to the keywords you just searched for. You'll also see similar results when you do searches in MSN and other sites.

Website owners pay Google to display these ads and are charged a predetermined amount every time their ad gets clicked by a web surfer.

With the Adsense program, you will display these same text ads on your site just like Google and get paid for it. All you do is copy and paste some provided HTML code into your pages and Voila!

Every time an ad is clicked on your site, you will receive a certain percentage of what Google receives from the advertiser.

Once your account reaches $100, you'll receive a check in the mail.
"Is Google Crazy?"

I know what you're probably thinking...
"What's the catch here? Why would Google just give away money advertisers are paying them?"
The answer...
Because Google is very smart.
Now that I understand how Adsense works, I can see that it's a win-win situation for everyone involved, and the bottom line benefits Google.

Let me explain...
Since the advertiser's ads are now being displayed on more web sites all over the internet (instead of just Google's site), they are getting much more exposure.
More exposure means more clicks and even more traffic for their site over a shorter period of time.

This is good news for Google because the more traffic the advertisers receive, the faster their advertising funds are used up.
Remember, they get charged every time their site gets a visit. And of course, it is Google's hope that they'll continue to keep funneling more money into their account for more ad exposure.
What an ingenious way for Google to increase the amount of money they earn from advertisers while building loyalty with website owners (like us) who are now getting paid to help them advertise.
Of course, I'd expect nothing less from the #1 search engine on the web. :)
How Google Matches the Ads to Your Site's Content
One of the main reasons this program is so successful is because the ads that are displayed closely match the content of your website. This increases the chances that someone will click on the ads.
Here's how Google accomplishes the content match (in their own words)...

"...We go beyond simple keyword matching to understand the context and content of web pages. Based on an algorithm that includes such factors as keyword analysis, word frequency, font size, and the overall link structure of the web, we know what a page is about, and can precisely match Google ads to each page."

So let's say you have an information website about yoga. Once you join Adsense and paste their ad code into your site, Google's technology will determine the topic of the pages by scanning for keyword repeats, page title, etc.

If successful, you will see ads that relate to yoga displayed on your web pages. Of course, the more related the ads are to your site's content, the better the click-thru.

Keep in mind, the ads may not be an exact match because it depends on the ads inside Google's database. So instead of seeing yoga ads, you may see more generic ads like exercise, healthy eating, etc. This is not a bad thing because these are topics your visitors will likely be interested in as well.