Before we can answer the question ?should you invest in individual bonds or bond mutual

funds?, we have to first understand the purpose of owning bonds in your portfolio. Novice

investors use bonds as an income generator, relying on yields to supplement living expenses

during retirement. Institutional investors and competent advisors, on the other hand, view

bonds as a tool to reduce portfolio volatility. Total return, not just bond yield, is what counts. If the purpose of holding bonds is to control portfolio risk, then owning bond funds, not individual bonds, is the appropriate choice.

Individual bond shares are not cheap. A single corporate bond can cost you $10,000 or more.

So, if a retiree with a million dollars decides to allocate 40% of his portfolio to bonds

($400,000), he would likely have to purchase at least forty different issues to achieve a

somewhat diversified bond portfolio. The higher costs associated with acquiring individual

bond issues may prevent many investors from sufficiently diversifying among different issues.

In contrast, an initial investment in a bond fund might cost only $1,000 to $3,000 depending on

if you purchase it in a retirement account or not. As a bond fund holder you can own stakes in

dozens, perhaps hundreds, of bonds with one purchase. Let?s take for example the Vanguard

Short Term Bond Index (VBISX). If you own an IRA, you can hold 642 distinct bond positions

with a $1,000 investment in the fund?a far cry from the 40 issues we purchased in the

previous example.

Costs

While individual bonds do not incur the ongoing management and operating expenses of bond

funds, they do have associated expenses including brokerage commissions/fees and bid-ask spreads) that all investors should consider. Furthermore, retail investors (as most of us are)get less favorable pricing (commissions AND bid/ask spreads) than institutional investors. The

costs of trading individual bonds are very hard to accurately pin down and commissions are

never fully disclosed. If ever there was an area for institutional traders to make obscene profits

in the markets, it?s the bond market.

When you purchase a bond fund, you know what the cost will be: a transaction fee and the expense ratio. There are a handful of low priced bond funds available, including the Vanguard

Bond index we discussed above whose annual expense is only 0.20%.

Safety

Many investors are under the impression that owning bonds is a risk-less transaction. That is a myth that results in a false sense of security. The fact is that bonds, whether corporate or treasury respond to daily changes in interest rates as well as credit conditions. Individual bond investors might take comfort in knowing that at the end of the maturity period, their principal will be returned. However, throughout the maturity period, their principal will fluctuate. As interest rates rise, bond principal will go down (since the bonds become less attractive to new investors). If the owner of the individual bond feels compelled to sell their position before the maturity date, they may likely take a loss during a period of rising interest rates.

Bond funds are much more liquid. Granted, bond funds do not have a fixed maturity (meaning

principal nor income is guaranteed). But, fund managers are constantly buying and selling

bonds within the portfolio in order to maximize interest income and capital gains.

Additionally, if you only own forty bond issues in your portfolio, having one or two of them

default can put a serious damper in your day. In contrast, because a bond fund holds

hundreds of bond issues, if a handful of them default the impact might be nonexistent.

The Benefits of Indexing

By now I hope I?ve convinced you that bond funds are more attractive than individual bond

issues. But, what type of bond fund should you buy?

There is a strong argument in favor of owning bond index funds instead of actively managed

bond funds. In general, bond index funds offer you broad bond market exposure for a fraction

of the cost of an active fund. All other things equal lower expense ratios result in higher returns for you. Furthermore, with actively managed funds, investors assume an additional level of risk: manager risk.

In conclusion, there are distinct benefits to owning bond funds in lieu of individual bonds.

Despite their ongoing expense, bond funds provide a better alternative in terms of diversification, liquidity, and the availability of reinvesting dividends. A low cost low cost bond index fund will help you achieve the portfolio risk control you need. Remember, just as with equity investments, the more broadly you diversify, the better results you will attain.

Millions of Americans buy mutual funds by simply choosing them as an investment option in their 401k plan.? How do people go about investing in mutual funds outside of their retirement plan at work?

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There are at least three popular ways average people buy mutual funds, each with its advantages and disadvantages.? Where to invest depends to a large extent on how involved you are willing to get in the process.? Some people want to learn how to invest, and others want to rely on someone else to handle their investments.

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Let?s look at three popular ways to buy mutual funds, starting with how to invest if you want to rely on someone else.

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If you want to buy mutual funds with a minimum of time and effort on your part, contact an investment professional.? Even though these folks usually call and solicit you, you can call them.? Look in the phone book under financial planners, stock brokers, or investment services.? Some life insurance agents sell mutual funds as well.? Perhaps your local bank or credit union has a representative on board who sells mutual funds.

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The advantage of this approach is that someone helps you make financial decisions, and deals with the details, including the paper work.? The disadvantage is that you will pay sales charges (loads) and/or other fees that you can otherwise avoid.? Rather than choosing a professional at random, I suggest you ask investors you know who they deal with, and how they feel about them.? Needless to say, some professionals in the investing business are better than others at their job.?

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A second popular way to buy mutual funds is the ?supermarket? approach.? For example, by opening a brokerage account with a major discount broker, you should have access to hundreds of funds to buy.? To get started, go to your computer and search for ?discount brokers?.? Once you have an account with money in it, to buy mutual funds you just click to buy.

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The advantage here is the wide selection of funds available from several different fund families.? You should be able to buy funds without sales charges, but there will be transaction fees, which are often quite reasonable.? On the other hand, this is basically a self-serve supermarket.? If you want advice on how to invest or where to invest your money, service is limited.

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The third approach is to go with a no-load fund family like Vanguard, Fidelity, or T. Rowe Price.? Search ?no-load funds? on your computer to find a list of them.? These investor-friendly investment companies have toll-free numbers you can call for assistance in opening up a mutual fund account.

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There are numerous advantages to this third approach to investing in mutual funds.? You deal directly with the mutual fund company, there are no middlemen.? You can talk to their representatives toll-free and ask questions without sales pressure.? They are used to talking to average folks who are not rich, and who don?t speak the language of Wall Street.

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The major no-load fund families offer a broad variety of mutual funds that have no sales charges, and often have some of the lowest yearly expenses in the industry.? This makes their no-load funds a low-cost way to buy and hold mutual funds.? Plus, these mutual fund companies offer investor assistance and services that are free of extra charges and fees.

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When you invest with a no-load fund family, you can buy or sell mutual funds on your computer or toll-free on the telephone without paying any sales charges or transaction fees.?

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The disadvantage here is that you make your own investment decisions.? You decide how to invest and where to invest your money in the various mutual funds they offer.? Plus, you may be required to fill out your own forms, like the application required to open an account.

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You can save thousands by buying no-load funds directly from a no-load fund company.? This is the best way to go IF you are up to speed on how to invest and investment basics.? If you are still clueless, there are plenty of articles available to help you learn about investing and mutual funds.

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Investing in mutual funds is a relatively safe way of growing your net worth, but such investments are not entirely free of risks. Before you pick on any particular mutual fund for investment you should watch out for a few things.

Performance

The first thing you should look for is whether the mutual fund you are planning to invest in is outperforming or under-performing with respect to the market. Good and safe mutual funds are those that consistently outperform the market. Changes in the net asset values (NAVs) of such mutual funds are consistently one step ahead of the market. For example, if the index that measures market movements goes up, the NAV of most good and safe mutual funds will also move up at least as much as the market or even more than the market. On the other hand, when the market moves southwards, the NAV of most good and safe mutual funds will move down but such depreciation will be less than or at the most equal to the market’s downward movement. Unsafe or risky mutual funds are those where the opposite occurs – when the market moves up, the NAV of risky or unsafe mutual funds may move up less than the market and may even move down despite a bull run in the market. Such under-performing mutual funds should always be eschewed when taking an investment decision.

Churn and earn

The next thing to watch out for is whether the mutual fund is undergoing too much “churn and earn”. This means you have to check whether too many transactions by the mutual fund are resulting in higher fees or costs to the investor. In this context, the worst offenders are those mutual funds that have a lot of spurious churn. Every time a mutual fund buys or sells stocks, the broker or brokers it employs make a neat pile from the commissions. So, these brokers try to encourage a lot of churn or buying and selling of stocks by giving a kickback to the mutual fund manager. Although direct bribery is illegal, payment of soft money through a sponsored trip to Hawaii or letting the mutual fund manager have a swanky Wall Street office for $1 a month is not. The only loser in all this spurious churn is the investor, especially in cases where the small print says that the investor will have to pay the brokers’ fees as well.

Lack of clarity

Mutual Funds that have prospectus, annual reports or statements of additional information written in such a way that they are difficult to understand should also be avoided. The lack of clarity in their documents is almost a sure sign of lack of honesty in their dealings or a lack of competency in managing funds – both of which are strong reasons for avoiding them for investment purposes.

Risky and unsafe mutual funds are also characterised by having too many restrictions on how and when investors can sell or redeem their mutual fund shares. Mutual funds that have too long lock-in periods or those which slap a hefty exit load at the time of redemption should be eyed with suspicion and are likely to prove to be unsafe and risky.

Beware of scams

Finally, there are mutual funds that are outright scams. There have been reports of fund mangers selling stocks at prices other than what has been reported to the investor. For example, the fund manager may have sold stock at prices that prevailed before closing of the day’s trade although the investor is told that the transaction took place at closing prices which were lower. The manager then pockets the difference and with most such transactions involving large volumes, even a fractional price difference can lead to substantial gains for the manger. Again the only loser in all this is the investor who gets short-changed by the mutual fund operator!

Private funds and finding people who are able to provide private funding can have a dramatic impact upon your ability to succeed at building lasting wealth.? Many people find that without some assistance, taking the first step towards long term financial security can be difficult. Achieving your investment goals can be a complicated process and traditional lenders may shy away from individuals who have a poor or little credit rating. Many individuals find that securing the necessary funds to make a solid start to building can made easier when they approach private individuals for funding.

What are Private Funds

Private funds are those financial resources that are made available through the private sector or private individuals. For those who are interested in building a business, seeking venture capital or investing in real estate, there are a number of private funding opportunities available. Using private funds provides you with the advantage of lower costs, but more importantly, private funds are generally more flexible than other loans.

With daily living expenses, mortgages, credit cards, car loans and other loans eating into your income, using private funds can be one means of securing the money you need to start getting ahead financially.? If you use the private funding to begin building long term wealth, and you manage to create a solid profit margin through real estate investment, then private funds can really help you start to get ahead.? Private funds will let you stay in control of your finances and provide opportunities for achieving your goals when you may not be able to receive the loan through a regular financial institution.

Securing private funds from private individuals generally means that you borrow the money from these lenders who in turn want a return on their investment. Borrowing in this way is a lot more flexible than borrowing from lending institutions. This gives you the advantage of tailoring a loan to fit your unique investment goals and lending requirements.

Securing Private Funding

Getting private funding for your investment goals could be easier than you imagine.? You might find that you can secure funds through a family member, business associate or friend. One way to secure the funds is through simply letting people know that you are interested in borrowing the money.? If someone is familiar with the process it will be easier. If you need to look further afield to find the money you need, you might still find that this is simpler than you had thought.

One option for securing private funding is to seek out lenders through networking via investment clubs, real estate clubs and via contacts you make in these places. Many investors who are seeking private funding will recommend that you ‘prospect’ for investors willing to put up the cash for your planned investment. By regularly networking and building your contact base, you’ll find that you have a wider circle of people you can approach when seeking private funds. Once you have a solid group of contacts, you’ll also find this can help you learn of new opportunities for real estate investment and you’ll have a group of lenders who genuinely understand the investments you are making.

Another opportunity for finding potential lenders to provide private funding is via internet ads.? These can help you gain more information about how to secure private funds, as well as a wealth of additional information through educational opportunities and reports. It’s not advisable to advertise for prospective lenders online yourself. Instead, it is recommended that you attend networking events or investment workshops and similar to meet others who have an understanding of private funding and an interest in lending funds for profitable opportunities. The general rate of interest on private funds is fairly consistent with personal loans, sitting at about 9-15%. This makes the use of private funds a mutually beneficial activity for both the investor and the lender.

If you are seeking an opportunity to begin investing, then private funding for real estate investment is a chance to get started on the road to financial security and long term wealth. By using private funds, you can access the money necessary to carry out investment deals for mutual benefit. In securing funds where you may not have been able to if you had to go through traditional channels, you’ll achieve your goals for real estate investment faster.

One major short sale concern of the bank is investing the time and effort in arranging a short sale then having the buyer not close on the short sale. Due to this possibility you can expect the bank to ask for a “Proof of Funds Letter” or a “Mortgage Commitment Letter” as a needed part of the short sale package.

This request is often a major hindrance for investors that are flipping the deal with what is regarded as a double closing or simultaneous closing. What are yourr options?

Here are a few possible (remedies|solutions} for the needed proof of funds letter:

-Bank Statement. If you have the funds available send the bank a recent bank statement as your “proof of funds letter”.

-Obtain a Proof of Funds Letter. This letter can be acquired from your bank, mortgage broker, non-public hard funds provider, or anyone which has the power to provide transaction funding.

-Mortgage Commitment Letter. I am not a fan of the Mortgage Commitment Letter because a bank issues a loan commitment after it has approved both the house and you. The home appraisal must meet the bank’s rules and the bank may need the real estate be in a better condition then the current state of the property. For that I feel a commitment letter is better suited for purchasing houses that don’t involve a short sale.

-Home Equity line ( HELOC ). If you have available equity in a property a HELOC on the home can serve you well. First, there is no charges on most HELOC for unused lines of credit. Second, it meets the banks suggestions for proof of funds letter even if these are not the funds you intend on closing with.

The bottom line is unless you have a longtime relationship with the bank it’s likely you will have to show evidence of funds in some manner. If you are new with some resources, find a good hard funds provider to work with and they can supply the proof of funds letter you need.

A proof of funds letter can be referred to by many names in addition to the standard meaning of a letter that states you have funds available to complete a transaction. A proof of funds letter is often used in real estate short sale and REO purchases to provide explanation that an investor or buyer has the power to purchase the property they are making an offer on.

Understandably, the currently overworked loss mitigation or short sale negotiators wish to be certain that they are working with a buyer that may perform. They need to know the purchaser has the assets if an agreement can be negotiated on the estate property.

A “leased proof of funds letter” appertains to monies being deposited into a clients private or business account by a backer for a fixed fee. The bank “blocks” the money so that it is not permitted to be withdrawn by the customer ; however the money is in the account to show proof of funds. Extra terms used for this type of exchange are “standby letter of credit” and “blocked funds letter”.

The WSJ said that the U.S. Solicitor’s office claimed “persons who were looking to temporarily lease funds in order to enhance their creditworthiness when applying for loans were instead provided with false proof-of-funds letters on bank stationary showing the funds had been deposited in their accounts.”

Needless to say, it is critical to grasp the difference in the sort of proof of funds letter obtained. If you can access private funds, HELOC loans or funds that can be borrowed from buddies or family, then providing bank records would supply the required “proof of funds letter” paperwork.

If curious about legit “transaction funding” or “acquisition funding” for short sales or REO flips, a normal “proof of funds letter” can be obtained. Look for a lender or financier that is providing transaction funds for the total amount of the acquisition cost without regard for your money or credit situation. Typically a transaction funding fee is between 2-5% of the total of funds used to flip the property at a “double” or “simultaneous” close. This fee is taken from profits at the closing.

If you have an interest in purchasing Real Estate Owned or short sale properties, then you want to understand the fundamentals of transactional funding and proof of funds letters and how they relate to your property interests and activities. Basically, the transactional funding refers to the funds borrowed for a very short period to transfer a property from the present owner, to the transaction coordinator, then to the new owner. Proof of funds letters are used to help secure financing and clear the way for the estate transactions you are involved in.

The use of transactional funding allows the short sale process to happen smoothly. The basic grounds for the loan is that once the first owner is prepared to sell and the buyer is prepared to take over the property (usually with the standard mortgage ), there’s a short term loan wanted to help the transfer period. This suggests the transactional funding is a loan that exists for some hours, then was recovered when the final property owner pays for the property.

Transactional funding works not just for the short sale eventuality listed above.

When buying property, the buyer must provide some kind of evidence that they have the funds to cover the property acquisition – this is where a proof of funds letter becomes helpful. This document that the investor can use to indicate to the parties involved in a real estate exchange that you have pre-qualified to purchase the genuine estate.

This kind of document is particularly useful if you are involved in short sale transactions and REO purchases that are structured with a double closing or when using transactional funding. They can also be used for other transactions that require documented evidence of your financial resources.

Using this letter, the buyer/investor is able to secure any required extra funding or to reassure the vendor that they have the means to fund the estate purchase.

After you know how these financial opportunities can be employed to the best advantage, you will be on track to achieving economic security thru real estate investment.

Morgan Foreman is a recommended author in the field of foreclosures and short sales. He will show you how to obtain guaranteed transaction funding with no cash or credit needed. Do you need a proof of funds letter? Learn about Proof Of Funds and visit www.WeProvideTheFunds.com

WHAT ARE HEDGE FUNDS????

?www.turnkeyhedgefunds.com

In the securities world, the term “Hedge Fund” does not necessarily imply any use of “hedging” as commonly understood; for example where commodity traders use options to “hedge” a commodity position. Presently, in the securities world the term “hedge fund” refers to any type of Private Investment Company operating under certain exemptions from registration under the Securities Act of 1933 and the Investment Company Act of 1940. “Hedge Funds” are often referred to as “alternate investment vehicles” and are tailored to the needs of sophisticated, high net worth private investors. A Hedge Fund is generally structured as a limited partnership having a general partner responsible for the investment activities and day-to-day operation of the fund, and limited partners who are the investors supplying capital but not participating in trading or operations of the fund. The limited partners have limited liability. That is, their exposure to loss is limited to their investment. The General Partner has unlimited liability and is liable for the activities of the partnership. The General Partners principals limit their liability through the use of a corporation or limited liability company as the General Partner. (Of course, the principals cannot limit their liability from the application of the anti fraud provisions of the Federal Securities Laws.) All of the investors’ capital is pooled and is utilized by the General Partner or Investment Manager to implement its trading or investment strategy.

?Hedge Funds are “Non-Public Offerings.” The private offering exemption prohibits Hedge Funds from making any public offering. Therefore, Hedge Funds are prohibited from general advertising and generally secure investors through word of mouth, consultants, registered representatives, brokers or investment advisors. Hedge Funds have investors that are either “accredited investors” or “qualified purchasers.” In general, the Federal Securities Laws define the terms “accredited investor” and “qualified purchaser” in terms of minimum asset and income threshold that must be met before they qualify to be investors in the Hedge Fund. Since the Hedge Fund generally limits investment to “accredited investors” or “qualified purchasers” both of whom are required to meet certain minimal asset and/or income thresholds, the Fund Manager or administrator must gather background information on potential investors to determine whether they meet the minimum requirements to be “accredited investors” or “qualified purchasers.” By making a non-public offering to certain kinds of investors, (accredited investors or qualified purchasers) the investment vehicle will be exempt from registration requirements of The Securities Act of 1933 pursuant to the safe harbour provisions of Rule 506 of Regulation D. Where the investment vehicle is limited to no more than 100 investors, and otherwise complies with the safe harbour provisions of Regulation D, such an investment entity is exempt from the extensive regulation pursuant to Section 3(c)1 of The Investment Company Act. Section 3(c)7 of The Investment Company Act offers a similar exemption to private investment companies with “qualified purchasers” as investors.

As an unregulated entity, the Hedge Fund Investment Manager is free to undertake greater risk on more volatile positions thereby exposing investors to potential substantial profit as well as substantial losses.

?Typically, Hedge Funds provide for the payment of an Incentive Allocation or Performance Fee to the hedge Fund Manager/General Partner. Performance Fees range from 20% to 40% depending on the strategy employed by the Hedge Fund Manager. Typically, the Performance Fee provides for a “high water mark” structure which provides that incentive fees are paid only to the extent that the fund continues to meet or exceed the “high water mark.” Additionally, typical Hedge Funds include Management Fee of 1% to 2% of all assets under management.

?Generally there are two kinds of Hedge Funds. On the one hand, there are the huge worldwide funds operated by charismatic managers such as George Soros. On the other hand, there are small boutique-styled Hedge Funds identified with a particular segment or investment strategy. The Fund Manager’s expertise, experience and background in recognizing investment opportunity will dictate that fund’s particular niche. For example, there are the “Biotech Hedge Funds” which are managed by experienced and highly qualified investment managers who may also hold advanced degrees in science and medicine. There are “Tech Hedge Funds” specializing in the technology sector managed by individuals having specialized experience trading in that sector. With the emergence of day trading and the availability of the trading technology, a number of floor traders and brokers are leaving the traditional brokerage and exchange venue to participate in the computer screen trading phenomena.

?The boutique “Hedge Fund” typically relies on the particular skill and expertise of the Investment Manager or Trader. The highly specialized Investment Manager may utilize a “Sector” style of investing focusing on a particular industry or economic sector. Conversely, an Investment Manager utilizing a “Market Neutral” style will maintain a portfolio of securities which are generally ? short and ? long. Some Investment Managers utilize a “Value” investment style based upon assets, cash flow and book value; while other Investment Managers follow the “Emerging Markets” style and invest in emerging and foreign market equity and debt. “Trading” funds utilize an opportunistic investment style taking advantage of market trends, events and opportunities for short term profits. Each Fund Manager develops and uses a particular investment style that is unique to the experience, expertise and personality of its manager.

?Unlike Hedge Funds, Mutual Funds raise money publicly; are highly regulated by the Securities and Exchange Commission, the Internal Revenue Service and other agencies; and offer investment diversification and are restricted from purchasing many types of derivative instruments, leveraging, short selling and other kinds of transactions.

?Unlike the Mutual Fund Managers, the Hedge Fund Manager generally invests in the fund that they manage and participate in profits as well as risks with their investors. Unlike the Mutual Fund fee structure (which is determined on assets under management) the Hedge Fund Manager receives incentive allocations on performance.

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