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The Best Mutual Funds – Part 3

September 14th, 2009

mutual-funds-3 This is the last in a 3 series post about the best mutual funds money can buy for 2009. Now I realize that we’re almost 3/4ths of the way through 2009, but I have been using these funds all year for my clients that I manage money for, and you’ll see when you look them up that they’re doing quite well. The following is the remainder of my best mutual funds page from www.great-financial-planning.com and my picks of the best places to put your money.

OK, so you’re just about ready to see my list. The best mutual funds to own tend to be index type funds. The truth is, most actively managed mutual funds UNDER-perform the major market indexes over time. There are a lot of reasons for this, and we’ve already mentioned most of them. Commissions, expense ratios, and taxes all add to the cost of owned actively managed funds. All these costs make it much harder for the manager to keep up with, not to mention out-perform the market index.

“…the best way to own common stocks is through index funds… - Warren Buffett, Berkshire Hathaway Inc. 1996 Shareholder Letter

“A very low-cost index is going to beat a majority of the amateur-managed money or professionally-managed money,” - Warren Buffett 2007

“Additionally, those index funds that are very low-cost (such as Vanguard’s) are investor-friendly by definition and are the best selection for most of those who wish to own equities.” - see page 10 of Berkshire Hathaway Inc. 2003 Annual Report

“Over the 35 years, American business has delivered terrific results. It should therefore have been easy for investors to earn juicy returns: All they had to do was piggyback Corporate America in a diversified, low-expense way. An index fund that they never touched would have done the job. Instead many investors have had experiences ranging from mediocre to disastrous.” - page 5, 2004 Berkshire Hathaway Annual Report

“Most individual investors would be better off in an index mutual fund.” - Peter Lynch

The Best Mutual Funds for 2009 (and beyond!)

The following are all no-load funds. (Of course!)

Dimensional Small Cap Value (DFSVX) This is a small cap value fund that I believe is poised to perform extremely well as the market and economy begin to recover from this recession. Small cap stocks tend to be the first to recover after a recenssion ends, and this fund should be a top performer. Dimensional funds are index funds, but they are enhanced index funds. Dimensional Fund Advisors takes a market index and then screens out the stocks they feel are less likely to perform as well. They use 26 different screening methods to narrow down the list of stocks they want to buy. Then they use some timing and trading strategies to determine when to buy the stock.

Dimensional Emerging Markets Value (DFEVX) This is an index fund that invests in emerging foreign countries. Emerging markets, or under-developed countries, also tend to lead in performace coming out of a recession. This fund invests in countries like Brazil, Chile, China, South Africa, Czech Republic, Hungary, Mexico, Poland, Israel, Malaysia, South Korea, Indonesia, Phillipeans, Thailand & Turkey. It does not invest currently in Argentina.

Dimensional Tax Managed US Marketwide (DTMMX) This is another index fund that invests in large, mid and small cap companies here in the United States. Morningstar has is rated as a mid cap, but it really invests in all of them. Due to it’s heavy mid and small cap holdings, I believe it is also poised to do well coming out of this recession.

iShares FTSE/Xinhua China 25 Index (FXI) This is actually an ETF (which is basically a mutual fund). To read more about the benefits of ETF’s click here. Basically this is an index fund that buys the 25 largest and most liquid Chinese companies. The Chinese market lost a huge amount of it’s value in 2008 and has some great potential for 2009. This fund trades on the NY stock exchange, and trades just like a stock. This fund lost almost 68% of it’s value during the last 12 months, so there can be some heavy volatility here. Don’t bet the farm on it, but this would be a nice portion of your international exposure. Save yourself the effort of doing research on Chinese companies and just buy some of this.

iShares U.S. Financial Sector (IYF) This is another ETF index fund that tracks the Dow Jones U.S. Financials Index. This fund lost over 75% of it’s value during the last 12 months, and is now having a nice rebound as you can imagine. I think there is most likely some great potential for returns in the financial sector, and a low cost index fund like this is an excellent way to get some exposure.

Energy Select Sector SPDR (XLE) Yes, it’s another ETF index fund that invests in companies from oil, gas, energy equipment & energy services. This is a great, low-cost way to get exposure to the entire energy sector, including the servicing companies. These stocks all tend to move up and down with the price of oil. Last year oil got over $147/barrel in May, and by October it was below $38/barrell. We could easily see oil prices right back up above $100 in no time at all.

Dimensional International Value (DFIVX) This is another DFA index fund that invests in developed foreign countries. This would include the following: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom. This would be an excellent choice for the bulk of your international exposure.

Amana Mutual Income (AMANX) This is a large cap value fund that invests in mostly U.S. stocks for preservation of capital and current income. It’s has a 5-star rating from Morningstar and you can check out it’s details at www.Fidelity.com Although this is not a small cap fund, you still need to have some exposure to large caps at all times in your portfolio. The unique thing about this fund is that investment decisions are made in accordance with Islamic principals. It diversifies investments across industries and companies, and generally follows a value investment style.

Fidelity Strategic Income (FSICX) This is another one of my best mutual funds picks for 2009. This is a bond fund that invest in many different types of bonds, so it’s called a multi-sector bond fund. It invests primarily in debt securities by allocating assets among four general investment categories: high yield securities, U.S. Government and investment-grade securities, emerging market securities, and foreign developed market securities. The fund uses a neutral mix of approximately 40% high yield, 30% U.S. Government and investment-grade, 15% emerging markets, and 15% foreign developed markets. High yield bonds are another type of investment that tend to out-perform as the economy and market begins to recover.

If you would like to learn more about the benefits of hiring a professional money manager to help you manage your portfolio of mutual funds, including your 401K plan, click here.

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Posted in Financial Planning, Investments, Mutual Funds, Retirement Planning

Tags: Berkshire Hathaway Berkshire Hathaway Inc Best Mutual Funds Common Stocks Corporate America Cost Index Expense Ratios Index Fund Index Funds Index Type Individual Investors Major Market Indexes Managed Funds Managed Money Market Index Mutual Fund Peter Lynch Shareholder Letter Terrific Results Warren Buffett

Preparing Your Finances For Missionary Service

August 31st, 2009

Missionaries At Brazil Temple

So you’re at a point in your life where you’re ready to quit the daily grind and start following your true passion. For many people today, this means doing some kind of volunteer missionary work. It’s the time in your life when your days are just as busy as ever, buy your only pay is the heart-warming satisfaction that comes from giving back. It’s a time when most people find that in serving others, they grow more than they ever thought they could. Serving a full-time mission really can be one of the best times in your life.

Preparation For Service

Whether you’re planning to serve in another state, or in a foreign country, there are a lot of things you need to prepare for prior to leaving. In addition to making arrangements for your house, car, & utility payments, there are a lot of financial things to think about.

Power of Attorney

A power of attorney gives someone else the power or authority to act in your behalf in legal or business matters. This obviously needs to be someone you trust very much, like a family member or trusted advisor. This person can sign binding documents in your behalf and do pretty much anything you could do for yourself (with the exception of changing a will). If you are serving somewhere in Africa you will not very easily be able to sign a tax return, or endorse a check that needs to be cashed.

Online Account Access

These days you have to be pretty darn remote to not have online access to your financial accounts. But there are STILL a lot of places you could go where your only source of power would be from a currant bush. Just in case you do have an opportunity to get on the web at some point during your mission, you’ll most likely want to check in on your bank & brokerage account balances. Here, you can usually also get copies of tax forms too which can be very helpful. Make sure that wherever possible, you are set up for online account activity.

Insurance Coverage

You may be going to a place where you’ll have healthcare provided to you as part of the mission. But in the event that you’re on your own for health care, you need to make sure that you have adequate health insurance. You can buy foreign travel health insurance if you need to, but you’ll want to do your homework on it. If you’re serving stateside and you don’t yet qualify for Medicare, you’ll want to make sure you have a good health insurance plan with a nationwide network of doctors. If you need to get some low cost health insurance quotes, go to www.TurningPointBenefits.com.

Investment Management

Your investments are one thing you definitely want to have someone keeping an eye on for you while you’re gone. This could help you avoid a terrible financial disaster, and help you to relax and focus on what you’re there for. Choosing a good money manager who will put your best interests first is a critical to making this work. Hiring a Certified Financial Planner will help ensure that your advisor is looking out for only you. See my previous post called Why Work With A CFP?for more information as well. Asking a family member to take care of this might save you a little money in the short run, but could cost you royally in the long run. An experienced & trustworthy financial planner will be worth their weight in gold. You will always be able to communicate by email and get your statements and trade confirmations online as long if you have internet access. Also, most banks and financial firms can forward your paper account statements to overseas addresses as well.

Now Go To Work!

Once you’ve taken care of these critical financial issues, you can more easily focus on your missionary service whole heartedly. Now it’s time to get your papers in and get to work! Good luck!

If you would like to speak to us about helping your with any of the financial matters mentioned above, CLICK HERE.

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Posted in Financial Planning, Health Care, Insurance, Retirement Planning

Tags: Account Balances Activity Insurance Binding Documents Brokerage Account Business Matters Car Amp Currant Bush Family Member Financial Accounts Full Time Insurance Coverage Missionaries Missionary Service Missionary Work Power Of Attorney Satisfaction Tax Forms Tax Return Time Mission True Passion Utility Payments Volunteer Work

Why Work With A Certified Financial Planner?

August 26th, 2009

Alphabet Soup

These days it seems that everyone in the financial services industry has some letters displayed after their name, indicating that they hold some sort of professional designation. There’s CPA, CFP, CLU, ChFC, PFS, CMFC just to name a few. Like alphabet soup, there are lots of letters and they don’t really seem to spell anything. Many people don’t understand what these designations mean – such as “Senior Specialist” or “Retirement Advisor” – or what is required to obtain and keep the various designations.

Today there are over 90 designations, degrees, titles, certifications, and accreditations available in the financial services industry. For this reason, investors need to be very careful not to assume that just because a person has some letters after their name, that they are an expert in handling your financial needs. Some designations represent legitimate expertise, while others are merely marketing tools. For more information on the meaning of various designations, visit ’s FINRA’s website and click on the “Investor Information” tab, and do a search for “understanding professional designations”. You will be able to type in the letters of the designation you would like to find out more about the issuing organization, prerequisites and education requirements, continuing education requirements, and exams that must be passed.

Here are a few good designations to look for:

CFP or Certified Financial Planner. The CFP is the most comprehensive financial planning designation that a professional can earn. It requires that a candidate complete a series of courses approved by the Certified Financial Planner Board of Standards. Each course requires the passing of a final exam, and then a comprehensive final exam must be passed at the end. A CFP has studied all areas of financial planning including: retirement planning, estate planning, investments, insurance, & taxes. Candidates must also have 3 years of personal financial planning experience and a Bachelors degree, or have 5 years of personal financial planning experience. Another big benefit of working with a CFP is that they are required to act as a fiduciary for their clients. This means that they must do what is in the best interest of their client no matter what. This reduces the risk of an advisor selling something to a client that may not be in the clients’ best interest, all because the advisor was thinking about how they would be compensated. CFP are required to complete 30 hours of continuing education training every two years. This helps keeps them on the cutting edge of changes in the industry.

ChFC or Chartered Financial Consultant. The ChFC designation is issued by The American College, an accredited university specializing in financial education. A candidate must have at least 3 years of full-time financial services business experience in the 5 years preceding the awarding of the designation. They must complete 6 core and 2 elective courses that cover most of the same information that a CFP will study. Each course has a final exam, but there is no comprehensive final exam required. 30 hours of continuing education training every 2 years are required, which also helps to keep an advisor in the forefront of the financial services industry.

Be Wary

Even if you are working with another member of the church, you still need to watch out for designations that take a few days of classroom study, or a few hours of self-study, plus a fee to earn. Many of these are really just marketing tools to make people thinking they are working with an expert (and a way for the issuing organization to make some money). Just because they have letters after their name doesn’t mean they are qualified to handle your life’s savings. Do a little homework and don’t be afraid to ask a few questions, you’ll be very glad you did.

If you would like to talk to one of our professional LDS Advisors, CLICK HERE.

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Posted in Financial Planning, Retirement Planning

Tags: 3 Years Alphabet Soup Certified Financial Planner Certified Financial Planner Board Certified Financial Planner Board Of Standards Clu Chfc Continuing Education Cpa Cfp Education Requirements Financial Services Industry Finra Information Tab Marketing Tools Personal Financial Planning Pfs Prerequisites Professional Designation Retirement Advisor Retirement Planning Understanding Professional Designations