Your Questions About Investing In Mutual Funds

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David asks…

What is the accounting for investments in mutual funds?

Hi, I’m interested in IFRS accounting policies for investments in the units of mutual funds.
In my case, the mutual fund invests in some illiquid long-term assets like construction projects and property.
Any ideas would be highly appreciated!

Justin answers:

Presumably the intention at the outset is to hold these investments for long term. These would be classified as Available-for-sale financial assets (AFS assets). The initial recognition is to record the acquisition at cost (which would be the fair value at that time). At each subsequent balance sheet date, they are measured at the fair value, with any fair value changes recognised directly in equity, through the statement of changes in equity, NOT in the income statement. When the AFS assets are derecognised, the accumulated fair value changes previously taken to equity would be taken to the income statement.

Chris asks…

how to gain in investing Indian mutual funds?

in the time of BSE 19000–21000 points, i invested certain amounts. now 16000 now the investment is lower in capital.shell i wait for time

Justin answers:

You should have invested some more money when the market was all the way down to 8000. However, its still not a bad time to invest for the long term and you can put some money in mutual funds. However, now you must be prepared to wait for the long term.

Michael asks…

In yahoo/finance/investing/mutual funds, why does the Annual Total Return (%) History change?

In May 2007, I recorded performance data for VHGEX as follows:

2000 -0.17 7.27
2001 -3.73 12.29
2002 -5.61 12.97
2003 44.51 8.94
2004 20.09 4.55
2005 11.77 0.22
2006 23.59 3.93
Now, in July 2007, the return field for each year is the same, but the diff field (and presumably the category field as well, but I didn’t record that) has changed:

2000 7.02
2001 11.93
2002 12.85
2003 9.08
2004 4.52
2005 0.25
2006 3.88
Likewise for TRMCX, FLPSX, and several dozen others: the return is the same, as I would expect, and the difference vs. category changes. How can this be? What happened in the past is invariant; what are they factoring in that causes a change? I need good data for my evaluations; this seems like an “adjustment” that distorts the reality of what happened?
I understand why Trailing Returns (%) vs Benchmarks changes, since it is calculated from a moving date–last end of quarter. But for the other, I don’t get it.

Justin answers:

The difference column changes because the category is subject to “survivorship bias” which means the some members of the category are no longer in business, so they are no longer included in the category. The long-term effect of this is that the category overstates reality because the losers drop out, and the surviving members are counted.

James asks…

what’s the procedure for investing in mutual funds online.?

please tell me the procedure for investing in MF online step by step without going to any bank bracnh or mutual fund agent. please tell me any other important tips.

Justin answers:

Start investing in mutual funds

I have had a number of people ask me how to start investing in the stock market. Many simply want a road map to invest with out any vagaries. I have seen a lot of articles and heard a number of experts on this subject blab about vagaries on how to get started. This article is tells you just how to start investing if you are beginning investor. I am in no way being compensated by the fund recommended and yes I own this fund!

If you want to just start investing here it is step by step read on.

Contact mutual fund company

Contact Royce mutual funds and set up a Roth IRA account. You can do this online or over the phone. My experience has been they have been very happy to help. Be sure to set up E-delivery of prospectus and reports otherwise they will charge you 12 dollars a year for your account (custodial fees).

In my opinion this is the simplest way to get started investing in the United States stock market.

Invest in the Royce Low Price Stock Fund symbol RYLPX. I have owned this fund for years and I am glad I did. The Fund manager Whitney George has been with Royce for 18 years and has done a great job year in and year out.

Make regular contributions to your account.

Take some time to learn about investing. The more you learn the more you can earn.

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