Thursday, August 16, 2012

Long - Term Investments For Retirement Planning


To build and maintain a successful retirement portfolio, you need to find mutual funds that will best help you achieve your objectives. In the early 90's, I searched for investments that had to meet my criteria of 1) average or low risk, 2) above average performance, and 3) distribution of dividends (income and capital gains). After several years of burning the midnight oil and analyzing thousands of mutual funds, I established and built an investment portfolio for our (spouse) Individual Retirement Accounts. The core of our investments is diversification and growth. Over the past decade our IRA accounts have reflected positive growth year after year after year.
Risk: This indicates the volatility in terms of its investment objectives. The risk is assigned to a mutual fund in its attempt to achieve the fund category objective can be Low, Below Average, Average, Above Average, or High in overall risks.
Performance: The percentage is a gain or loss when the fund's net asset value is more of less than the value of the share price. The net asset value is the current market value of the mutual fund's holdings (stocks/bonds) per share. The market value of a fund is also referred to as share price. When a mutual fund declares a distribution for shareholders, its nav/share price is reduced by the amount given its investors.The return of a mutual fund includes the distribution and the performance. A net asset value computation is undertaken once at the end of each trading day based on the closing market prices of the portfolio's securities.
Distribution: The dividends and interest earned by a fund on its investment is the fund's income. Most equity funds distribute income quarterly. When a fund sells an investment security for a higher price than originally paid, the fund has a gain. When a fund sells an investment security for a lower price than originally paid, the fund has a loss. If the investment security is held by the fund for more than one year, the gain or loss will be a long-term capital gain or loss. If the investment security is held by the fund for less than one year, the gain or loss will be a short-term capital gain. The gains and losses are netted together and when the fund has a net gain, that gain is usually distributed to the shareholder once a year.
Consider the over-whelming benefits of having an IRA portfolio that have successful funds and you reinvest the distribution every year instead of receiving the amount in cash:
  • Your total mutual fund shares increase in proportion to the dollar amount of distribution received.

  • You are dollar-cost-averaging your purchase of shares because the net asset value is reduced by the share distribution amount and additional mutual fund shares are purchased at that the lower price. Example: At the close of the market, a mutual fund distributed $1.25 per share. The net asset value of the share will be reduced by $1.25. In Addition, any performance gain or loss will be included in the share price.

  • You do not incur any tax liability until reaching the age of 70 l/2 than you must withdraw a yearly Required Minimum Distribution (RMD) based on the value of your IRA.
  • Over the long-term, your performance/return can grow substantially.
Rollover: If an IRA investment is under performing and you are not satisfied with the investment, you can rollover the account into another mutual fund, CD, etc. without penalty or tax consequence. as long as you do not receive any distribution from the fund. It is always is beneficial to check with your tax accountant on your action before taking it.
Best news of all is that possessing an a IRA account enables you to control, manage and direct your future investments (savings). I know from having over 20 years first hand experience. My IRA portfolio includes a blend of certificate of deposits, annuities, stock mutual funds and bond mutual funds. The choice is yours, and you can be your own financial planner of the success of your IRA portfolio.
Remember there is no guarantee of future performance and mutual funds are not guaranteed by the government. Always read the prospectus before making an investment. Good luck in your retirement plans and may your portfolio continue to grow and grow!
I am the owner of Mutual Interest Data Service, Ltd. my website provides visitors, like yourself, with unique, current and factual reports on mutual funds. These reports are a five-year analysis of mutual fund performances and distribution of income and capital gains. In 2000 I was granted permission (reference file No. 137-1) by the staff of the Securities and Exchange Commission's Division of Investment Management to operate an Internet Website (
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