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Friday, October 2, 2009

Take the Mystery Out of Mutual Fund Jargon

We all know what it's like - you finally have some time and start reading, or you find a Web site that looks inviting and you come face to face with words, phrases, acronyms and technical terms that are just foreign to you. What do you do? If you're like most people, you forge ahead and try to discern and understand the intent and meaning of words and phrases that aren't in your everyday vocabulary, and then you kind of give up. Obviously that's not going to help achieve your investment objectives, goals and aspirations.

Here are a couple of examples that may help to illustrate the point. What's a "fed wire?" Should there come a time when you might need money quickly you can have cash sent to you overnight with a fed wire. This procedure involves the Federal Reserve System which is able to transfer monies form one bank to another overnight. The custodian of your fund is almost invariably a commercial bank and a member of the Federal Reserve System. By making arrangements in advance you can set up your fund account to use a fed wire to transfer money from the proceeds of a redemption (which you can arrange by phone) and send the proceeds to your bank where it will almost always be at your bank, in cash, the next business day. It's easy to do, just contact your fund's transfer agency (that's the shareholder service organization that maintains all of the records of all the shareholders of the fund you own).

Let's take it a step further and get a little more technical. What's the difference between ARMs and CMOs? Don't worry, it has nothing to do with either fingers or toes. The point is that there may come a time when having a convenient source or glossary of commonly used mutual fund terms may be helpful to you in arriving at a more informed investment decision. There's no doubt that you really can't know too much about anything that affects your financial future and well being.

A final note - has anyone ever spoken to you about a mutual fund withdrawal plan? You may have heard a great deal about how and which fund to invest in, but what about a system that allows you to withdraw a specific amount of money from your account either monthly or quarterly, which amount you can change or stop at any time (often with a simple phone call). Well, it can be done and many people enjoy this convenience while maintaining full control of the amount and frequency of regular, periodic cash withdrawals.

courtesy of http://EzineArticles.com/?expert=Dan_Calabria

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