|
(Frequently Asked Questions)
The
Terms Value, Growth and Blend, What Are They...?
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What Do They
Mean By Large, Mid and Small-Cap Funds...?
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Why Do You Only Charge $18
A Year...?
If
I Change Funds, Won't I Lose Money...?
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here for the Answer)
Why
Don't You Guys Just Tell Me Which Funds To Invest In...?
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Should I
Look Over Fed’s Funds Every Week...?
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What Is Your Strategy?
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Do I
Have To Wait Till 59 1/2...?
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FAQ
Answers:
Q.
Fidelity, Morningstar and Fed's Funds
All Use The Terms Value, Growth and
Blend To Describe Fund Management Style. What
Are They Talking About?
A. When it comes to investment style
or strategy there
are generally two different types,
Value
and Growth.
Blended
approaches tend to borrow strategies
from both styles.
Value:
This
approach seeks to buy stocks in companies that the Value Fund
Manager deems to be under-priced, thus possessing a greater earnings
potential than the market is actually giving them
credit for. One typical example would be, problem
plagued corporations that appear to be excellent
turnaround candidates. Companies who for
different reasons are going through temporary financial
downturns would also be favored by Value Fund Managers.
While searching for such "bargain" stocks,
these fund managers often gravitate toward the less
sensational and less popular sectors such as
industrials, financials and utilities.
Since Value Managers generally focus
on "buying low", with hopes of, "selling
high" the inherent downside risk of Value Funds is much
lower than that of the more pricey and volatile Growth
Funds.
Growth: Managers
using this approach usually seek to buy their stock in
sectors with fast growing companies. The strategy
here is to cash in on the momentum of these popular and
often expensive stocks. Growth Fund Managers tend to
search for corporations that they believe will meet or
exceed certain growth targets. For example, some of
these mangers will not even consider buying a
particular stock unless they are convinced that
the company's earnings will grow by at least 20% per
year for the next 3 years. Strong earnings like these
are most commonly found in sectors such as technology and
pharmaceuticals.
Because Growth Fund Managers usually buy
these popular stocks at high prices (in hopes that
they'll go even higher) their downside risk is often
considerable. At the same time, because these stocks
are sometimes very much in demand, the upside potential
is definitely worth considering, especially for
the aggressive investor.
Blend: There is
quite a gap between the Growth and the Value
approaches, this gap is filled with an array of styles that
Blend the strategies from both the Value and Growth
philosophies of investing.
Sources:
Yahoo Finance > Education
Center
Growth and Value Funds
Explained
Morningstar.com
Should You Invest In
Growth or Value?
By Emily Hall
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Q.
What Do They Mean
By Large, Mid and Small-Cap Mutual Funds?
A. Stock
Mutual Funds Are Often Categorized By The Size (Market
Value$) Of The Companies They Invest In.
"Cap" is short for Capitalization which refers to
the company's current total value on the stock market.
-
Invest in
established companies with market values of over $8
Billion.
-
Are generally more
stable with less inherent risk than Small - Caps.
-
Often yield smaller
returns than fast growing Small - Caps.
-
Invest in
companies with market values between $250 Million and
$1 Billion.
-
Generally are higher
risk with potential for higher returns or higher losses.
-
Are often very
attractive to Aggressive Growth Investors.
-
Invest in
companies with market values below $250 Million.
-
High risk
with high growth potential.
-
Many of these
companies are start-ups, take-over candidates or
companies poised to enter new markets.
Source: Yahoo
Finance > Education Center - Large-Cap and
Small-Cap Funds Defined
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Q.
Other places charge hundreds of
dollars for 401k
financial help, why is
Fed's Funds priced so low?
A.
At Fed's Funds
we do not rely on our product
to make a living. Fed's Funds
is our hobby that we have
shared with our
coworkers since 1998. But we do rely on our product to
help us build a strong and secure retirement with our Delta
401k. So we have a strong personal interest here,
unlike other financial organizations who are securing
their retirement through other means.
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Q.
The funds I'm in now have taken
a beating! If I change my funds
now won’t I lose all that
money?
A.
That is a common
misconception. Sports teams
often change their Coaching and
Management staff to get better
performance from their Teams. Trading up to a better
performing fund simply changes
the staff that is managing your
money. Your money is still in
the market and thus still “in
the game” to recover those
losses. Trading up to a better
performing fund will simply
allow your money to grow at a
faster rate from that day
forward. The only thing that
you really lose by
trading up is the
Underperforming Management that was handling your hard
earned money.
Back to the Top
Q.
Why don’t you guys just tell me
which funds to invest in?
A.
Here at Fed’s Funds we
are Not Investor Advisors
or Financial Planners and
therefore not legally qualified
to make specific fund recommendations.
But we Are very
interested, seasoned and informed
Investors who realize that our
financial future is, more than
ever, tied to the performance of
our 401k(s).
One of our biggest
concerns is for our fellow
Employees who are putting off
responsible management of their
401k money. Many will consequently forgo much of the
early, comfortable and healthy years of their retirement.
No one is more personally affected by a 401k’s performance
than the Employee who funds the account and supervises it's
management.
We feel that
your place is to responsibly manage your money
while our place is to support, encourage and enable you to conveniently and
intelligently
administer this important part
of your retirement income.
Your 401k is actually a small business
designed to fund your retirement. Making
good, simple business decisions is what successful 401k
investing
is all about.
Back to the Top
Q.
Should I go over my Fed’s Funds
spreadsheet Every Week?
A.
Fed’s Funds offers relevant performance
information in many convenient formats for virtually all
investing styles, weekly, quarterly and annual. The more
aggressive your investing style the more we believe you should
keep in touch with your 401k performance. We also encourage
Investors to maintain their 401k much like they would maintain
their other major investments (home,
car, etc…).
By consistently investing a
little time and effort now, you'll enjoy
the rewards of an earlier and
more comfortable retirement in
the years ahead. It's The Consistency That Counts!
Stay Connected To Your 401k!
It's Your Future!!
Back to the Top
Q.
As 401k Investors, what strategy
or game plan do you guys at
Fed’s Funds use and how often do
you change funds?
A.
In contrast to the "Buy-Hold and
Forget About It" method, we use
a Simple, Consistent, Good-Sense
technique. To us,
it makes good sense to diversify (a blend of Large Cap
Funds, Mid-Caps, Smalls, and Internationals) then stay invested in those funds that are Meeting or
Beating their respective index.
By
moving out of consistent Under
Performers and Trading Up to the
Better Performing Funds, we
keep our retirement portfolio as
healthy and productive as
possible.
We are not trying finish the 401k “race” in
first place.
That would require taking too many “gutsy,” "hit or miss"
market-timing risks with our serious retirement money.
Our goal is to consistently finish well by Keeping In Touch,
and minimize our risk by Carefully Trading-Up to strong, healthy
performing funds. It’s that simple.
As
for how often we trade up to
healthier funds, on the average
we may change 1 to 3 funds per
quarter or
sometimes
not at all for several
quarters. It all depends on how
and if market conditions change.
Q. Do
I Have To Wait Until I’m 59½ in order to make withdrawals from
my 401k or IRA and avoid the tax penalty?
A.
Surprisingly, The Answer
Is No. Actually,
there are several rather interesting ways to take early
distributions from your 401k without incurring the 10%
penalty. Two of these are discussed below, using excerpts
from a 401khelpcenter.com article:
http://www.401khelpcenter.com/401k_education/Early_Dist_Options.html
*
“If you want to retire before age
59½ and begin taking distributions from your 401K plan, you
will generally be subject to a 10% early distribution penalty.
The early distribution penalty is the cornerstone of the
government's campaign to discourage us from plundering our
savings before our golden years.
Luckily, there are a couple of
ways to do this without paying the 10% penalty.
Leaving Your Job On or After
Age 55
There are two key points early
retirees need to know. First, this exception applies if you
leave your job at any time during the calendar year in which
you turn 55, or later, according to IRS Publication 575.
Second, you can only take money from the 401k plan of your
last employer…
Substantially Equal Periodic Payments (Section
72(t))
The substantially
equal periodic payment exception is available to anyone with a
401k plan or an IRA, regardless of age, which makes it an attractive
escape hatch...”
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