Tuesday, November 20, 2007

What is a Prospectus and How Do I Read it?

Investments & Trading

What is a Prospectus and How Do I Read it J. Foley

When you first buy into a mutual fund, most people have a thousand questions. How has the fund performed in the past year? How do the fees work and which ones do I have to pay? Are there any penalties for withdrawing my money early? What happens if the fund goes out of business? All the answers to these questions are listed in what is known as a prospectus.

A prospectus is simply a book or pamphlet that lists all the information about a fund. Every mutual fund company gives out a prospectus, and sometimes, if the performance for a particular fund hasn’t done well recently, it will even come with bad news about that fund. A prospectus must be accurate. The United States Securities & Exchange Commission checks on the validity of the statements in all financial documents released by investment firms to make sure they are honestly showing people what the fund has done and what they think it will do.

When you open the front cover to a prospectus, they usually hit on three different topics right off the bat: the fees that this fund charges, the objectives of the fund and the performance of the fund. While there are other concerns when you look at a prospectus, these three things are the most important.

Most companies will present the fee schedule in an easy to read graph. Remember, the fund must disclose all fees, there can’t be any surprises.

A mutual fund prospectus is also required by the SEC to list their performance. They must list this information, even if it’s not up to the expectations of the fund. It can usually be found within the first few pages of the prospectus. Most of this data is presented in the form of a table so that reading it and understating it is simple. Also, there is no shame whatsoever in asking questions. Every investor had to start somewhere and if you don’t ask questions about a particular mutual fund before investing in it, you might just be throwing your money away.

There will likely be more information in your prospectus as well, including profiles of the managers that handle the fund, as well as the founders of the investment company and so on.

A prospectus is like a bible for whatever mutual fund you choose to invest in. With oversight provided by the SEC, a prospectus must be a honest document that shows you exactly what you’re getting yourself into with every mutual fund.

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Article Written By J. Foley

Wednesday, November 07, 2007

What A Forex Rate Is And How To Read It

Investments & Trading

What A Forex Rate Is And How To Read It By J. Foley

When we talk about the forex rate, we’re talking about the relative value between two currencies -- how many of one the other is worth, in other words. For forex traders, the forex rate is the basic information they use to do their job. The rate is to a forex trader what nails are to a carpenter.

If you plan to get involved in forex trading, reading and understanding the forex rates is absolutely vital to your success, like learning the basics of addition before becoming a mathematician.

A forex rate is always expressed in pairs, followed by a number. The number is how many of the second currency you’d get for one of the first one. For example, you might see USD/EUR: 0.7928. That means that one U.S. dollar is currently worth .7928 euros. If you were to exchange $100, you’d get 79.28 euros for it. Since the number in this rate (0.7928) is less than 1, that means the second currency is currently stronger than the first one -- that is, the euro is stronger than the U.S. dollar.

Forex traders look at rates constantly throughout the day. They carefully examine trends in various currencies’ performance, noting which are going up and which are going down. If a rate suggests, say, that the British pound is starting to increase in value compared to the euro, a trader might swap his euros for pounds. Then, when new rates show the pound has become very strong, he can swap back again, turning a profit because the pound is now worth more than he “paid” for it.

Forex rates are available everywhere on the Internet. Casual observers to the forex trading industry might glance at them for reference on hundreds of different Web sites. Regular traders, though, usually own software that keeps them up to date on rates throughout the day, without having to visit a particular site to get them.

This is important, because rates change constantly, and can be influenced by a wide variety of economic and political factors. The overall change over the course of a day usually isn’t more than a few percentage points either way, but there are minor changes regularly, and those minor changes add up in the long run. Experienced traders watch the rates for those tiny fluctuations, carefully observing whether there is a general upward or downward trend that requires their attention.

Article Written By J. Foley