In This Issue:
The 5th Rule of Mutual Fund Investing
5. Intelligently diversify your funds and allocate your assets.
Don't use a scattershot approach to diversification in your fund portfolios. You need a smartly devised and clearly delineated plan of attack that breaks down the percentage into which you’ll be investing in different fund categories, such as by company size or area of the world.
For many investors, a straightforward and sensible diversification plan will include funds that invest in companies of all sizes (small, midsized, and large) as well as companies inside and outside the U.S. Depending on your age and risk tolerance, you may wish to add a certain percentage of bond funds or income funds to the mix. Then you might choose to use a small percentage of your portfolio to explore other areas with the use of sector funds or region funds.
Myriad resources exist to assist you in building a plan for your portfolios, and you would be wise to avail yourself of those tools and other research to determine the best mix for your own needs.
In any event, avoid choosing mutual funds as you would at an all-you-can-eat buffet restaurant, piling on your plate a little of this and a little of that with no regard for how those funds come together in a sensible plan.
Did you know that nearly 50 percent of the sales and profits owned by companies in the Standard & Poor’s 500 index come from outside the United States? Simply by owning a mutual fund that tracks the performance of the S&P 500 may be providing you with all the exposure to global economies in the developed world that you need in your portfolio. Adding an international fund to the mix may tip your exposure to non-U.S. business beyond your expectations.
You can avoid this kind of problem by always knowing what your fund owns. Don’t rely on a fund’s stated investment style and objectives to convey the actual securities held in the mutual fund. Fortunately, you can learn more about any fund by studying its publicly provided reports or using mutual fund analysis tools such as those provided by BetterInvesting.org.
Download a free sample issue of the Mutual Fund Informer and, for a limited time, subscribe at a special Charter Subscription Rate!
In the next Insider, we'll review rule No. 6: "Concentrate your portfolio in just a handful of funds."
How to Give a Departing Member a Fair Share
Rules Vary for Transferring the Cost Basis of Stock Withdrawals
by Russell Malley
Previously we’ve written in general about cost-basis assignment to stocks when they’re transferred to a member in a withdrawal. Some treasurers have asked for details of the process. The rules can be a bit complex and differ for partial withdrawals and full withdrawals. The easiest case is a partial withdrawal. The club’s cost basis in the stocks is transferred to the member withdrawing.
Multiple factors come into play for a full withdrawal. The first item considered is whether the member’s cost basis in the club is less than or greater than the club cost basis in the stocks transferred. If the member’s adjusted cost basis in the club — after adjusting for current year earnings and cash received — is greater than the cost basis of the securities being transferred, the club’s cost basis will need to be adjusted up to get the basis for the withdrawing member. If the member’s adjusted basis is less than the cost basis of the transferred stock, the club’s basis in the stocks will be reduced.
How is the club’s basis adjusted to get the member’s basis in the stocks?
If the club’s basis needs to be higher, the increase is applied first only to transferred stocks that have an unrealized gain to the club. The amount each stock basis is increased is proportional to the gain on that stock to the total gain on all stocks with a gain to the club.
If the increased amount is greater than the total unrealized gain on transferred stock, the remaining increase is apportioned to all stocks in proportion to their fair market value at transferal. Notice that the increase isn’t proportional to the total gain on all stock transferred, but only to those that have a gain. Stocks with a loss wouldn’t be adjusted at all.
Read More …
Learn How to Use the Investor Advisory Service
We have just released a revised edition of How to Use the Investor Advisory Service, required reading for subscribers or anyone interested in the nuts and bolts of the award-winning Investor Advisory Service newsletter.
In How to Use the Investor Advisory Service, our staff and editorial team have put together a brief resource on the methodology used by our analysts to select stocks for the Investor Advisory Service. In addition, we answer the most common questions about the newsletter, including how best to use it in building your own portfolio to understanding the features of each issue. You’ll gain valuable tips for any stock investing portfolio as well.
Our updated edition includes changes made to the IAS website and to the newsletter itself since the last version of the guide was published.
The 27-page booklet is available in PDF format, readable on any computer and most e-readers. We recommend that all new subscribers read this guide when they subscribe, and there may well be helpful reminders to our longtime subscribers as well.
Download your free copy today!
The Best Little Convention in Texas
It isn't too late to register for the 61st BetterInvesting National Convention Sept. 14-16 in Houston. The BetterInvesting National Convention is known for outstanding investment education and is delivered by top-quality educators from across the country. From educational offerings to networking and fellowship with like-minded investors, your attendance at BINC will help you become a Better Investor.
If you're unable to attend all of the convention, day-registration options are available on Friday, Saturday and Sunday. Many programs on Saturday, the 15th, also are free and open to the public. Don’t forget — parking is free, and hotel rates are reasonable should you choose to stay the night!
Friday, Sept. 14, 2012
Choose 6 Class Sessions from 36, Plus a Social Hour with the Corporate Sponsors for $120
Saturday, September 15, 2012
Choose from 8 Concurrent Corporate Presentations, choose 3 Class Sessions from 18, Plus the Free Sessions and Corporate Expo for $60
Sunday, September 16, 2012
Choose 3 Class Sessions from 18 for $60
So join us and Bring a Friend to BINC — the 61st annual BetterInvesting National Convention!
Click here to see the full schedule or register online now.
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August 23, 2012
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We develop high-quality software products and web services for individual fundamental investors, and powerful accounting tools used by the majority of US investment clubs.
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Events Calendar:
First Tuesday of each Month: Toolkit 6 User Group led by Doug Gerlach, ICLUBcentral Inc.
Third Tuesday of each Month: New Investment Club Orientation led by Doug Gerlach, ICLUBcentral Inc.
Doug Gerlach will also be speaking at the following events:
Aug. 25, 2012: Oklahoma City BetterInvesting Chapter EduFest
Doug Gerlach, Speaker
Sept. 4, 2012: Toolkit 6 User Group Webinar; Studying Small Companies in Toolkit 6
Doug Gerlach, Speaker
Sept. 6, 2012: St. Louis AAII Chapter Meeting
Doug Gerlach, Speaker
Sept. 8, 2012: St. Louis BetterInvesting Chapter Workshop
Doug Gerlach, Speaker
Sept. 14 - Sept. 16, 2012: 2012 BetterInvesting National Convention, Houston, TX.
Doug Gerlach, Speaker
Sept. 18, 2012: Investment Club Operations Webinar; Managing Your Investment Club's Portfolio
Doug Gerlach, Speaker
Oct. 2, 2012: Toolkit 6 User Group Webinar; Managing Portfolios in Toolkit 6
Doug Gerlach, Speaker
Oct. 16, 2012: Investment Club Operations Webinar; Handling Monthly Club Treasurer Tasks
Doug Gerlach, Speaker
Oct. 27, 2012: Dallas BetterInvesting Chapter Investor Education Day
Doug Gerlach, Speaker
Nov. 2 – Sat, Nov 3, 2012: Puget Sound BetterInvesting Chapter Investor Education Conference
Doug Gerlach, Speaker
Nov. 6, 2012: Toolkit 6 User Group Webinar; Quarterly Trend Analysis (& the PERT Approach) in Toolkit 6
Doug Gerlach, Speaker
Nov. 10, 2012: San Francisco BetterInvesting Chapter Investor Fair
Doug Gerlach, Speaker
Nov. 17, 2012: SE Michigan BetterInvesting Chapter Model Club/Workshop
Doug Gerlach, Speaker
Nov. 20, 2012: Investment Club Operations Webinar; Presidential Special Session: How to Be the Best Club President
Doug Gerlach, Speaker
Dec. 1, 2012: Philadelphia BetterInvesting Chapter Workshop
Doug Gerlach, Speaker
Dec. 2, 2012: Toolkit 6 User Group Webinar; Investing Globally: Studying ADRs in Toolkit 6
Doug Gerlach, Speaker
Dec. 18, 2012: Investment Club Operations Webinar; Closing the Club's Books
Doug Gerlach, Speaker
Submit Your Event!
Like 7-Eleven, we're not always doing business, but we're always open — go to the ICLUB Store and outfit yourself with the simple, yet powerful tools and services that smart investors have been using to grow their portfolios since 1989.
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