What makes a good mutual fund
Posted by Admin in Mutual Funds on 01/05/2010
Mutual funds are popular. If you are not invested in one right now you are more than likely to be invested in one in the near future either directly or indirectly. Choosing a good mutual fund is important for maximizing your investment performance.
Like any other investment choosing a good mutual fund really depends on your needs. Also like any other investment mutual funds are a balance between risk and performance. The higher the risk you are willing to take the higher the potential profits. Investing in individual stocks is considered riskier than investing in mutual fund although the potential gains are higher. Mutual fund usually hedge individual stock risk by managing a large portfolio of stocks and other instruments. That balance also averages the gains.
There is no simple answer to what makes a mutual fund good as the question is fundamentally wrong. The right question is what makes a mutual fund good for you and the answer depends on what you are looking for. In order to choose a mutual fund you choose both know what your options are and also really know and understand what your needs are and how much risk you want to take.
One of the more common mutual funds that tend to perform well at a lower risk are index mutual funds. Like their name suggests index mutual funds value is attached to the performance of a specific index like the famous S&P 500. Index mutual funds are pretty simple to understand and to track and for the most part there is no big difference between different funds if they invest in the same index.
Other funds invest in stocks and other instruments. Most funds have a theme or a policy of how they invest. For example a small cap fund invests in stocks of small cap companies why an technology fund invest in technology innovative companies. Themed mutual funds are managed by people who decide what to buy when to buy and when to sell each of the individual stocks. One of the most important things when choosing a mutual fund is to read about who manages its daily operations and who decides how the fund invests its money. Check how experienced the management is how long have they been with the fund and with other funds and how well have they done. Although a manager they did very well in the past can certainly fail in the future it is still statistically a better choice than an inexperienced manager or a manager that failed.
Since mutual finds have managers and other operation costs they have to charge some management fees. Usually the management fee is expressed in a percentage that the fund takes for itself. If you are investing long term that fee is less important. If you are looking for short term investments the fees can be significant and you should consider them when choosing the fund.
Education is your best tool when choosing a fund. Don’t be tempted to invest in a fund just because its headline says 25 percent annual gain. Read about it read about the management read about its investment philosophy and maybe even look at its portfolio and randomly pick a few stocks it is invested in and judge for yourself if those were good buys or not.
The Path to Fannie Mae and Freddie Mac Approval
Posted by Admin in Real Estate on 01/05/2010
So, you have been a mortgage broker for a while now, and you think you are ready for the next step: approval by Fannie Mae and Freddie Mac as a Seller and Servicer, so you can service your own loans.
In general, to be an approved Seller and Servicer for either FNMA or FHLMC, you are going to need to meet the following requirements: a corporate net worth of $500,000 to $1 million; adequate warehousing lines; three letters of reference; errors and omissions insurance and fidelity insurance; an excellent quality control program; and personnel experienced in all aspects of mortgage origination, processing, underwriting, funding and shipping, administration, service accounting and, of course, servicing itself.
These are only general, minimal requirements, so let us take a more detailed look at the requirements and the process. I preface the following information with the understanding that the reader realizes that approval of a firm by FNMA or FHLMC is at their complete discretion and is, to a great extent, a judgment call based upon your total package and all the factors included in it. All requirements are subject to change.
As far as FHLMC approval goes, net worth requirements are either $1 million or $500,000, depending upon whether you use the generally accepted accounting principles (GAAP) net worth of $1 million, or the FHLMC definition of acceptable net worth ($500,000). Unfortunately, a lot of potential applicants are not aware of the $500,000 net worth possibility. Even a call to Freddie Mac still found the operator not aware of that option, and claiming $1 million was a hard, fast requirement to be approved.
Acceptable net worth is defined by FHLMC as GAAP net worth minus any of the following: goodwill, purchased servicing, capitalized excess servicing, investments in joint ventures, investments in limited partnerships, REO, property, plant and equipment, receivables from affiliates, investment in affiliates, other intangibles and other assets, and deferred taxes on capitalized excess servicing. Audited financial statements are to be provided as part of the approval package.
One requirement that many still think is in force, but is not, is the requirement that a mortgage company
be approved by HUD-FHA in order to be a FHLMC Seller and Servicer.
When Is It Safe To Remove Equity From a 1031 Property?
An essential concept behind the process of a 1031 tax exchange is that a real estate investor must not draw any direct benefit from the funds gained as the result of the sale of his or her 1031 property; any cash removed from the sale is seen as ‘boot’, and as a result it is subject to capital gains taxes. As a result of this, refinancing in order to remove stored value from the replacement property enters into a very nebulous area in terms of acceptability under Section 1031.
In a case brought against a real estate investor by the name of Garcia, a tax court made it clear that all benefit received by a taxpayer the refinance of a piece of real estate in anticipation of selling it in a 1031 exchange will be deemed to be taxable boot. This court decision set a precedent for the manner in which these kinds of issues. Currently, a more common tactic is waiting until after the closing on the replacement property, and to refinance the piece of property at some point afterward. This strategy, however, brings up the question of how long it is appropriate to wait before refinance and removing value from a property.
The most conservative investors would tell you that you should wait a considerable period of time post-closing (maybe even two years), in order ensure that you are in compliance with the implicit meaning of Section 1031. The recent trend amongst the more liberal-minded contingency of property investors, however, is to assume that closing on a replacement represents a definitive end to the 1031 process, and so one need not worry about the substantiation of an exchange after this point. To a real estate investor who perceives the exchange process from this vantage point, it doesn’t matter the amount of time one waits before refinancing a 1031 replacement property, and many will choose to do so immediately after the closing has taken place.
If you are hoping for any definitive rule as to when it is safe to refinance a 1031 replacement property, you are doomed to disappointment, at least within the confines of this short article. The two perspectives that I have described in this article are merely opinions, and they represent extremes on a wide spectrum. Property investors vary a good deal when it comes to the manner in which they choose to approach these sorts of legally gray areas, and the most helpful advice that I can {give you is simply to speak with a qualified tax adviser or other legal expert in formulating your ultimate decision, and to work closely with him or her so that you can decide on the approach that will work best in light of your specific situation.