Your Questions About Advantages And Disadvantages Of Investing In Mutual Funds

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Donald asks…

I need help with personal management merit badge.?

I need to pretend I have $1000 dollars to save,invest, and to help prepare myself for the future. I need to know the advantages and disadvantages of saving or investing in the following. Common Stocks, Mutual Funds, and Life Insurance. All help will be appreciated.
– Fellow Life Scout

financi4 answers:

Try using the internet. You’re already there. Don’t waste our time, go research it yourself. That’s the whole point of the merit badge, so you actually learn it. Go be a big boy now and figure it out yourself, Life Scout.

Michael asks…

Wise to create an LLC solely for the purpose of holding and trading securities.?

I currently have a personal e*trade account. I would like to create a limited liability company whose sole purpose is to invest my money in securities-stocks, bonds, mutual funds. My personal e*trade account would be transferred to a new business account. Besides the asset protection, what are the other advantages to doing this. And of course, what are the disadvantages? Is this even possible? Legal? I know I should seek a tax attorney or accountant, but just a little advice would help me initially.

financi4 answers:

You should really consider establishing a S Corp for that purpose rather than an LLC. With an LLC, you’ll have to pay self-employment tax of 15.3% which goes toward social security and Medicare. And if you’re investing, you may be losing “capital appreciation” tax status in exchange for a less favorable “ordinary income” tax status. However, with a S Corp, you’ll only pay taxes on the salary you pay yourself. The rest you distribute to yourself through dividends since you are the only shareholder. Furthermore, with an S Corp, you have more latitude on the use of losses should you have a negative year. You will find the tax rules of LLCs more stringent when it comes to using losses from trading.

The downside with a S Corp is the formal paperwork. You’ll have to have notes from annual meeting and minutes from quarterly meeting even though it’s just you. I don’t think that it is a big deal for the tax savings. I’ve been a professional trader for 12 years and traded independently through my own S Corp for 6 of those years.

There is another way that might be even better but I know less about it. You can form a LLC and elect to be treated as a S Corp for tax purposes. I however would not attempt this without a very competent accountant.

The best site hands down for tax information for trader is http://www.greencompany.com/Traders/index.shtml

You won’t need a tax attorney – unless you end up suing your accountant because he mis-classified your business or something. It is also unlikely that you’ll be using the asset protection part of the LLC or S Corp structure because it is not likely that you’ll be getting sued as a trader (unless you have clients or investors but if that’s the case, you’ll probably want an arbitration clause).

My best advice is to take a deep look at that link. They specialize in accounting for traders. You’ll become very familiar with their site as you become a seasoned trader. Hope this helps. Good luck.

Me: Professional High Frequency Trader of 12 years.

Thomas asks…

economic help Please! does anyone know any of these questions?

1. explain why investing is an essential part of the free enterprise system and discuss the different types of investments and the advantages and disadvantages of each (including bonds, certificates of deposit, money market mutual funds, and stocks).

2. outline the key factors that led to the rise of the labor movement, the attempts of employers to resist such unionization, as well as the reasons for the overall decline in union membership that has occurred in recent years.

3.discuss the relationships between savers, borrowers and financial intermediaries and the benefits of such relationships.

financi4 answers:

Wow!

William asks…

anyone good with investing money? chooose best answer(:?

Let’s pretend that you have $5000 to invest and you have to divide it into the five different types of investments that were discussed in this lesson. How much would you put in each kind of investment? That is what you are going to do with this journal entry. You may have to review the advantages and disadvantages of the different choices because you also have to give a reason for the amount you put in each kind. You cannot put $1000 in each kind. That is too easy.
So below is the list of your choices with a brief description of the return you can expect with those that are in a fixed account.

Remember: you have to give reasons for the amount you choose, and it has to show that you know something about that choice.

Money Market Acct (2%)

Mutual Fund Acct (High Risk)

Mutual Fund Acct (Low Risk)

Municipal Bonds (5%)

Stock Market (Risk depends upon your choice)

financi4 answers:

With $5000 you can invest a group of nerds to help you with this homework question, btw we don’t want to play pretend with you lol

George asks…

I really need some help with this question. I cant find it in my book or on the internet.?

In an essay of at least four paragraphs, explain why investing is an essential part of the free enterprise system and discuss the different types of investments and the advantages and disadvantages of each (including bonds, certificates of deposit, money market mutual funds, and stocks).

financi4 answers:

I would recommend starting with a discussion of the need for capital to start new businesses or to expand existing businesses. Direct investment from individuals or firms is one way to get the capital you need to start or expand a business. Generally an individual or firm making a direct investment in a business expects to have a voice in how things are run, or a contract that provides various protections for their investment. Either of these can make running the business more difficult than it might otherwise be.

Getting capital from investors through a market provides liquidity for the investors and gives the business in need of capital a manageable way to deal with the investors, often through a board of directors charged with looking out for the shareholders if the money comes from selling stock.

Issuing bonds is another way to raise capital. Private companies can do this, but it is also the primary method for government and quasi government agencies and utilities to raise money.

Etc….

There are disadvantages to both the business and the investor in this approach. One is the difficulty of obtaining enough money from individual investors t, as a principal in a company is one way for a to get

Richard asks…

Should I buy ETFs or mutual fund?

Hi, I’m new to both of these I don’t know which one I should go invest on. My capital is $10000 and I’m interested in regional fund, like brazil?china? my time frame is about one half to a year(since I won’t have time to look at the market) My aim is about 15%(is it possible?)
what are some advantage/disadvantage of these two investment?
Which one I should go for, active managment/passive management?
does active managment means etf and passive management means mutual fund?
sorry for long question, have a good day!!

financi4 answers:

The “talking heads” on TV predict the stock market for the next 10 years will grow much slower than in the past, and will return around 6%. So 15% for 6 months is possible but unlikely considering how far the market has come so far since the low of March 9th.
ETFs usually have cheaper annual expense ratios than their corresponding mutual funds. But some fund families, like Vanguard, Fidelity, Schwab have some very cheap fees so the cheaper etfs are not always the case. Since you have such a short time horizon, it does not matter which is cheaper in your case. Mutual funds can be ordered anytime during the day but the sponsor only buys and sells for you at the end of the trading day. ETFs can be traded any time the market is open.
ETFs cost money to buy and sell (brokers fees, example Scottrade charges $7 per trade). No load mutual funds do not charge a buy/sell fee. But, as mutual funds are for longer term holdings, many funds charge you around 2% fee if you sell within a certain time period, usually between 2 months to around 6 months after you buy. It costs them money to buy and sell and process your account so to keep costs down, they don’t want “short term” holders.
Active management/passive management has nothing to do with etf/mutual fund. In the past, etfs were all passive management (which is also known as Index funds) but now, many sponsors are arranging to offer active management etfs. Mutual Funds are mostly active managed but if they have the word “Index” in their name (example Vanguard S&P 500 Index Fund, or Total Market Index Fund, or Total International Index Fund) then they are passively managed.
Mutual Funds are priced at net asset value, the value of the stocks they hold.
ETF are priced depending on market demand. So they can be priced higher than the value of the holdings, but they are usually priced pretty close.
Since you have such a short time horizon, in my opinion, you should go with an etf, and lower your return aim.

Robert asks…

2 questions economic if anyone knows these HELP?

1.What are the key factors that led to the rise of the labor movement, the attempts of employers to resist such unionization, as well as the reasons for the overall decline in union membership that has occurred in recent years.

2.explain why investing is an essential part of the free enterprise system and discuss the different types of investments and the advantages and disadvantages of each (including bonds, certificates of deposit, money market mutual funds, and stocks).

Please f anyone can help me figure out these two questions I read my book already and google it but im just not finding any helpful info I have 100 question test and I am so close to being done but im stuck on these two please if anyone can help its very appreciated thankyou!

financi4 answers:

Unions drastically lower the overall output of the production stages. Unions have over lived their need and only hold back the corporations that still have them. The saying “You get what you pay for” DOES work, however if you expect a raise each year because you are in a union, will people work even harder to get a raise next year, NO because they already know they are going to get one. Most Union workers are overpaid and labor is one of the highest, if not the highest cost of any business.

Okay, I will put SAVING and investing into one to try and help you understand it.

As demand rises, companies need to expand. However, to expand the companies need money. The fastest way for a company to increase its capital is to go public and allow people to buy stock in their company. They can then use this cash to build more factories, expand retail stores, open new branches, and increase overall income. Bonds are a way of a company to get money without having to sacrifice ownership of the company to the public. Money Market Mutual funds is ownership in many many companies without actually investing in the company. The Fund gains money from you and the other members and uses it to buy shares in many different companies. This means that if one company in the fund goes down, another might be going up, therefor your wealth raises as the stock market raises.

So investing is needed in a free enterprise system to aid in expanding and growth. If everyone just spent their money instead of investing it, smaller companies would not get the capital needed to compete with the larger companies. This would lead to monopolies, loss of job growth, less taxes collected, ect. As long as we are investing in newer ideas and technologies, we will always have long term growth.

Hope all that helped!

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