Retirement Investing

Retirement Mutual Funds: A Practical Overview

Retirement mutual funds are an investment vehicle used for the purposes of saving for retirement and to provide ongoing income during retirement. Mutual funds are effectively a collective of individuals who have pooled there money to buy a basked of securities. A management team is responsible for share selection and for running the day to day business of the retirement fund. The value of the fund changes on a daily basis in response to the total value of the fund which is reflected by the market value of the underlying securities and the number of participants that comprise the fund. The calculation method for this is known as the net asset value.

NAV = Total Fund Assets - Fund Liabilities _____________________________

No of Shares Outstanding

The advantage of mutual funds is that it is a place to park your money and leverage the expertise of money managers who do the share selection and management for you. There are different types of mutual funds with different investment mandates and styles. You can pick a high yield fund or a more conservative mutual fund for retirement. You can diversify by allocating to different funds that invest in different industries and sectors to minimize your risk. If one area of the market is likely to outperform another, you can allocate accordingly. Mutual fund rotation can also be employed to shift from one area to another. Mutual funds usually have track records so you can do some research to ascertain performance before deciding where to invest your money.

The disadvantage of mutual funds is the fee structure. Sometimes this can make mutual fund retirement switching impractical because every time you transact you get hit with entry and exit fees which eats into your capital. The common types of fees you are likely to encounter include the following: *Upfront fees: These are fees payable when you invest in the fund

*Selling Fees: There may be an exit or selling fee when you leave the fund.

*Annual management fees: A percentage of your capital that is paid on an annual basis to the management of the fund for services rendered in the administration and share selection for the fund.

*Information fee: Any fees that may be payable for information resources provided to investors.

Retirement mutual funds can be useful part of an investment strategy. The types of funds are varied as are the goals and objectives of market participants. Selecting a retirement fund will require some research to determine which fund suits your investment style. Whether you are looking for capital growth, income production or capital preservation, there are a range of mutual funds that can be matched to your style. Doing further research is the best way to know all your options before you commit.

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