Is it hard to get rich? Not really, if you’re young.

Its fun to play with financial calculators and see what might happen.

Assume you have just graduated from college, are about 22 years old and I just started your first real job. If you put $100 a month in an IRA that grows at 10% a year, you will have about $865,000 at age 65. 10% a year compound growth is about what you should exect if the money was invested in a no-load S&P 500 Index Fund.

So for about $23 a week or $3.30 a day you would be close to being a millionaire.

If you contributed the full $4000 a year allowed right now to an IRA (rising to $5000 in 2008), you would have $2,600,000. For about $11.00 a day, you would have a small fortune.

If you didn’t want to take a chance with the stock market because it goes down sometimes, you would still have over $600,000 if you could get a 5% return.

If your grandmother leaves you $10,000 in her will and you invest it for the same 43 years at 10% without adding another cent, you’d also have over $600,000 if you placed it in a tax sheltered account.

Time and the power of compound interest are on your side. So if you’re in you twenties and want to get rich, do whatever you have to scrape together that IRA contribution. Every day you procrastinate is another day your money is not working for you.

However, most people in their twenties need the money for more important things, like new cars and HDTV’s. You also have school loans to pay, children to raise and the new mortgage to pay off. But if you prioritize your life and stick to a budget, $11.00 a day is doable, although you might have to scrimp here and there.

Consider that most people are spending their lives paying the freight for borrowing other people’s money. If you save and invest, other people are paying you to use your money. It’s a lot more fun to see your money working to help you get rich than
having to work yourself.

Think about the effect expenditures have on your financial future. If you bought a late model used car instead of new one, you would probably save $10,000 or more depending on the model. That $10,000 as noted above, would grow to almost $600,000 by the time you’re 65 if invested in tax sheltered accounts.

Now look at it from the opposite angle, the extra money you spend on that new car you yearn for and must have now, will cost you $600,000 by the time you’re 65
and the car has long since been recycled into tin cans.

I’d probably buy the car too, but it’s useful to consider the consequences.

It gets harder to get rich slowly as you get older. If you wait until you’re 32 and put away $4000 at 10%, you would have about $975,000, still a respectable amount.
At 42, you’d only be able to accumulate approximately $350,000. If you’re 50 and
can start putting $5000 away today, you’ll have around $175,000 at age 65.

Everyone knows that Social Security is not going to allow for a comfortable retirement. Even if the plan can continue to pay out forever, which is questionable right now, the money you receive will be far from generous and is subject to taxation. And you might have a good pension plan at work now, but will you be able to hold your current job to
retirement?

If you have a Roth IRA, you can withdraw the money tax free after age 59 ½. Imagine having a million tax free dollars you can play with. It will well make up for the small sacrifices you have to make to get rich.

No matter what your age, start saving what you can now - today. Even if you only amass $100,000, you’ll be better off than most people entering retirement.

Ways to earn good profit out of mutual fund; It is more of commonsense

Mutual funds are the vehicle that help normal individuals to invest together in equity and debt market without taking too much of risk. The mutual funds are created with predetermined investment objectives, to suit different kind of investors. More over mutual funds are made in such a way that they achieve a variety of risk/reward objectives. However, the right way to benefit from mutual funds is to balance the risk as well as the potential to earn. That’s the reason, identifying the right level of risk tolerance, choosing the right schemes and allocation to the right asset class remains the most important factors in ensuring success from a mutual fund portfolio.

First point is the right funds in your Portfolio
When we select funds we need to make sure that we need to have right mix of right funds. For that we need to keep in mind your profile and the kind of fund that matches your profile. If you are a conservative investor, the composition of your portfolio would be different from someone who may have different risk profile and time horizon such as aggressive.
Moreover If you have created a portfolio of different equity funds, and wish to invest more in equity over a period of time. Make sure that you keep an eye over the exposure to all the sectors in which the funds have invested in. we need to look over the fund houses and fund managers styles, strategies, and philosophies. There is a difference between different fund manager’s style and strategies to a good level. The fund houses are very particular to their fund management philosophies and management style. The fund management style is further reflected in the performance of the funds they have.
As far as fund management style is considered we need to look at the performance of their funds over a period of time. To perform consistently over a period of time is not an easy task. Only few funds have been able to perform at a consistent rate. These fund houses and fund managers do follow certain styles which further become the core of the fund philosophies

As a Tax payer – Make use of its hidden potential
Equity Linked Savings Schemes (ELSS) are the best instrument that provides an investment option that provides you an affective and safe way to investing in equity market and save taxes. If we take this particular fund as a product it is quiet sure to give good returns over a period of time. Over a period of time equities have the potential to provide better returns compared to other instruments. These ELSS funds being equity oriented provide returns which can be really appreciable. ELSS have the potential to provide better returns than most of the options under Section 80C.
One of the important features is the tax efficiency in terms of returns earned through them. It is important considering that ELSS also aims to distribute income by way of dividend periodically depending on the distributable surplus. Moreover an SIP in any ELSS scheme will help you to save more by investing more, as you save more of taxes. More over the long-term capital gains can be very attractive and is again tax free.


Re-balance your portfolio if required
Ensure that the exposure of your equity portfolio to different market segments i.e. large cap, mid cap and small cap is in the right proportion. If not, you need to realign it according to your risk profile, time period and investment objective. You might need to scuffle the portfolio a bit in order to get it in right shape. An existing investor, need to make sure that the portfolio does not include too much of funds without any proper planning and allocation. The first step in towards rebalancing your portfolio is checking out which funds are not performing up to the mark. For this, the right way would be to compare the performance of your schemes with the benchmark and other funds in the same group. In the case of some non-performing schemes we need to remove them out through the redemption process in phases. We need to take notice towards the exposure to different sectors in the portfolio . While rebalancing the portfolio, the focus should be on those schemes in the portfolio that have been performing consistently and have a good quality portfolio.

Retirement Income Planning: Mutual Funds

When willing to invest in mutual funds for Supplemental Retirement Income Planning, you have millions of alternatives. It is always important to analyze the plan, its limitations and the risks you will be running, and thus, it would be easier for you to narrow your alternatives. For this matter, it could be helpful to get in contact with a Retirement Income Planning financial professional.

Mutual funds are classified in three main categories that differ in regards to their risks, features and rewards. They are money market funds, bond funds, which also receive the name of “fixed income” and finally, stock funds, which are also called “equity funds”. Let’s take a deeper look at each one of them.

Money Market Funds can only invest in just some high-quality, short-term investment that be issued by the U.S. government, U.S. corporations and local governments. These funds attempt to keep the value of a share in a fund, called the net asset value (NAV) at a stable $1.00 a share. The returns for these funds have always been lower than the other two kinds of funds. Because of this, money market funds investors have to be aware about the “inflation risk”. Although Bond Funds are a bit risky than money market ones, most of the time, risks can be controlled with greater certainty than stocks. In addition, due to the fact that there are many types of Bund Funds, their risks and rewards vary greatly. These risks may encompass credit risk, which refers to the possibility that issuers whose bonds are owned by the fund do not pay their debts; interest rate risk and prepayment risk, which is associated to the chance that a bond be “retired” early. Finally, there are differences between one stock fund and another. For instance, Growth Funds are focused on stocks that provide large capital gains, Income Funds invest in stocks that pay regular dividends, and Sector Funds are specialized in particular industry segments. In general, they present a medium-to-high level of risk.

Thus, people who are planning to invest in a fund that combines growth and income, which are definitely key factors, may find mutual funds an interesting balanced alternative choice for Supplemental Retirement Income Planning.