One of the popular stocks is Forex. This is a foreign market exchange. Forex supplies investment options, which investors often use charts to increase their odds of winning within the industry. Charts give the investors specs, such as high/lows, bids/asks, pips, spreads and so on. This helps them to decide what pair of currencies to bid on.

Forex markets often include Java charting, web charting, etc. These charts post updates each day. The Internet charges supply specs on UBS stocks Zurich markets and the London UBS markets, as well as the "Barclay Banks of London." These are some big investors in Forex, as well as "Sampo Helsinki Banks." Another is the "Dresdner Frankfurt Banks, Ally Irish Dublin Banks, OKO Helsinki, Ten-Forex Synthetic," and so on.

Forex charts provide the highest technology options that give updates each day. The readings supply readouts on current market affairs, such as paired currencies. You have to see the charts free to see how they work. RSSI, as well as Bollinger Bands, and the MACD take part in these exchanges, as well Rates of changes. You have moving averages, stochastic, standard deviations and other readouts.

Some of the popular is the Bollinger's, which indicators that allow investors to compare quotes or rates, as well as volatile timeframes in stocks.

Indicators use bands that rotate averages within center charts of Forex stocks. The top bans deviate Standards of SMA that increase lower Forex bands to subtract from the deviations. Instabilities are within these structures, which you may see within rate readings. At this time, you want to look close so that you make a good decision as to when the stocks present good outlooks.

In Forex (FX) or the Foreign Market Exchange, change rates apply, which these rates allow investors or traders to track percentages within the industry. Charts supply read outs for oscillators that fluctuate once the market subzero or changes occur. At this time, you can read positive and negative results.

These results display high/lows within the Forex stocks. Moreover, you see divergences within the market that sometimes transverse over lines at subzero levels.

Forex charts signal investors sent from indicators. This is what you read out to decide on the best pair of currencies. Currencies may be EUR/USD...EUR is the Europe dollar, which has higher value currently than the United States Dollar. Thus, this is when you want to bid EUR/USD rather than USD/EUR.

Japan and other foreign legions also have their own currency, which pairs with the US Dollar, or the Euro dollar. For the most part, when one-currency pairs with another you want to choose the currency first that has the highest value, which in this instance is the EUR/USD.

Many people think that playing the stock market is just for professionals and is very difficult to learn but that is not the case. There is plenty of useful information to be gained online, via newspapers and articles or through friends or colleagues who have some experience. It is a good idea to study quarterly and annual company reports too, looking for opportunities and trends. The more research you do beforehand, the better your chances of making wise investments.

You might want to start out by finding out whether your workplace offers a stock ownership program. If so, you might be able to pick up some discounted stock. If not, try to find out about the companies you are considering investing in. Find out who the executives are and whether their track records are good.

Try to find stocks that have price-earnings ratios a good deal lower than those of their peer group. Also, feel free to ask your broker for any information you would like. If he is recommending a certain company, ask for an explanation of why he has confidence in them rather than another company. If you know a little about the stock market already, a discount broker can save you money, rather than using a full service broker.

See if you can find companies with undervalued shares. These can make you better profits later on. Look for companies that have shown consistently good profits over a number of years rather than one which seems to be unstable or heading in a downwards spiral. Investing in companies who product products or services which you have some knowledge about is a good idea because you will understand how factors such as the economy and political climate can affect the company’s sales and therefore your potential returns on stocks.

Another very important thing to bear in mind is to know when to stop and cut your losses. You might want to spread the risk through investing in a variety of companies rather than putting all your eggs in one basket. Never invest more than you can afford to lose because nothing is a hundred percent guaranteed!

However it should also be noted that if you do not take a careful approach their can be some pitfalls. This article gives you 10 great tips if you are looking to begin trading in the Stock Market.

1. What are your objectives from Investing, and how much can you afford to invest? It is important that you clearly state and understand what it is you want to achieve by investing in the Stock Market. Do you want to hold onto stocks long term and look for a more stable but lower growth, or are you prepared to accept a little more risk and invest in some shares that may provide higher rates of return. You should possibly also keep some money aside instead of investing it all in shares in case your financial circumstances change.

2. The stock market is not a gamble. Don’t Speculate! Investing in a stock should not be like gambling on the slot machines in Vegas. Research the company you are thinking of investing in, as well as their competitors so you can make a more informed decision about whether the value of a stock is likely to rise or fall.

3. Investments should be long term. Like I said, the Stock Market is not Vegas. Whilst there may be some people out there who make a living out of day trading, and it can be a part of your portfolio, you should also have a portfolio of shares that you hold on to long term, and that are likely to appreciate in value long term.

4. Don’t get caught by the bump in the road. There may be volatile days on the market, kind of like bumps in the road. If you overreact to a minor bump, you could end up losing out it the market ends up correcting itself over the coming days or weeks. Remember that stocks should be considered a long term investment.

5. Look for growth industries, and identify the best companies in those industries It is always good to try and get into a sector ahead of the rest of the pack before prices begin to rise. This goes back to doing your research on particular companies and particular industries.

6. Diversify your portfolio to spread your risk.

As I have mentioned, there are risks associated with investing in stocks. As such, you should not put all your eggs in one basket and only invest in one stock. A diversified proposal spreads your risk, as if one stock is going down, you may find another of your stocks is appreciating in value.

7. Compliment your US share portfolio with international shares. Exposure overseas can typically be through managed funds.

In today’s globalised economy, with the options it brings for trading in international shares, it makes sense to spread your investments across various economies. Some of the more popular overseas markets to invest in include Australia, China and now India.

8. Set up an online trading account. It makes sense. You can have instantaneous access to a multitude of information, and online accounts have much lower fees than a standard brokerage house.

9. Monitor your portfolio as closely as possible on the performance of the companies you are investing in. You shouldn’t rely solely on stock price for the performance of your portfolio. If you have stocks in a company, you should regularly check their websites for news that may affect the price of a stock, as well as checking the business section of the newspaper.

10. Seek professional advice from a qualified stockbroker or financial planner. This is important when you are starting out, just to get a picture of your current financial position, and whether you have enough cash flow to begin trading stocks. You should be able to get advice through the firm you choose to go with, whether they are based online or offline.

These tips should help put you in good stead for your new investing adventure. Happy Investing!

The Philadelphia exchange was superseded in the early 1800’s by the New York Stock Exchange. The initial New York Stock Exchange was a group of business people who met daily on Wall St to trade their stocks or bonds. This initial trading was all done outside until the Exchange moved indoors in the early 1900’s. There has been a movement away from this traditional formula of trading though. Trading is no longer a Bricks and Mortar industry where you have to be in Wall St. Many people are now engaged in the online buying and selling of stocks.

The way the New York Stock Exchange works could be compared to an auction. If a company is listed on the Stock Exchange, they have a post in Wall St whereby trades are listed and a specialist is employed as an “auctioneer” to oversee the bidding on each trade. This form of trading keeps an accurate balance between supply and demand on the stock market so the price of the share is kept in check.

These days, it is much simpler to get involved in investing in stocks. You no longer worry about engaging a stock broker to act on your behalf, which can be time consuming as there is a lag between you calling your stock broker to take the order and the order taking place. If buying or selling stocks online you can place your order with the click of a mouse. It is also much more convenient in an increasingly frantic world with juggling and competing commitments.

There are many reputable companies through which you can set up an account to engage in buying and selling stocks online. These online companies provide you instantaneous access to a range of services that were previously only available through engaging a traditional stockbroker. Setting up an online account gives you access to a variety of services that you could previously only get by visiting a traditional stock broker, including up to the minute stock quotes, detailed historic performances of individual stocks, as well as detailed information about the companies; director’s, structure etc… One of the most common reasons investors like buying and selling stocks online compared with traditional brokerage is price.

There are much lower brokerage fees for buying and selling stocks online than there are through buying and selling stocks at a traditional brokerage house. This is combined with the immediacy at which you can gather information required in making your stock purchasing decisions when trading online. Many investors also like the independence associated with buying and selling stocks online. Many traditional brokerage houses would try and influence your decisions when buying and selling stocks, but an online account means all the decisions you make are fully your own.

As mentioned earlier, online brokerage sites are not just about buying and selling stocks online. They are also contain a wealth of information which can help influence your buying and selling decisions, by giving you access to extensive information about particular stocks. Many online brokerage sites will also provide courses designed to help you learn the tips and tricks of trading online. You can also get immediate access to your portfolio, instead of having to find all your stock certificates or calling your brokerage house.

In our globalised and interconnected society and economy, the reason that the economy has continued to grow is its ability to keep pace with increases in technology. The ability to buy and sell stocks online becomes a reflection of the economy adapting to meet the abilities of new technology head on. The ability of an investor to log in to their portfolio, no matter where they are in the world at that particular time, to buy and sell shares online gives them the opportunity to take a greater role in securing their own financial future.

For most of us, when we hear the words stock option trading, we automatically think of shares of stock being purchased and sold on the Stock Exchange, but in actuality stock option trading is something completely different from that. For those of us not too familiar with the ins and outs of trading and the stock market, when you trade an option, you are trading a right to a stock. That right then gives the owner the authority to purchase or sell a certain stock within a set amount of time, for a pre-determined price. Not only are rights to securities and stocks sold in this manner, but government bonds, foreign currency, and stock indexes also use option trading.

If the option being traded is a right to buy securities, you may hear it referred to as a call option. A put option is a right to sell those securities only, with no buy option. If you hear the term double option, it is a combination of a call option and a put option, which gives the owner to power to both buy and sell the securities. Call options are usually used for securities that are thought to gain in value in the near future. For traders, call options give them the power to get a rising stock locked in at a low price, so that they can turn around and then sell that stock for a nice profit, assuming that the value rises as predicted.

If for some reason the value of the stock fails to rise as expected, then the trader is not required to make any purchase, thus protecting his funds. Traders often use put options when a certain stock is thought to be falling in value, just the opposite of the call option. When a trader purchases a put option, he is required to pay a fee to the person selling him the option, often quite a hefty one at that. This fee is referred to as option money. If the person who purchased the option doesn't use it, he only will lose the fee, or option money, that he was required to pay for the original put option.

Oftentimes, a smart trader can use put options to secure their own funds, and sometimes, make a great profit for themselves in the meantime. Keep in mind, that anytime you invest money in stocks or options, you do stand a chance of losing those funds, so you should only trade with money that you can afford to lose. Don't use your mortgage money, or your child's school fees to play on the stock market, it's just not a wise thing to do, especially if you don't have a clue to what you're doing. Make sure you have a good solid trading foundation and education before you take the plunge. Some good ways to better educate yourself on the workings of stock option trading, is to invest in stock and option trading products, such as ebooks, magazines, stock trading sites, or even go for a well recommended trading seminar.

Options' trading is a good way to cover yourself from major losses, in the event you make a bad choice or call on a particular stock or investment. Many people are also now starting to participate in online options trading as well, which makes it easier and faster, since it can all be done right from your home computer.

Mutual funds are good options for American investors to meet their financial goals. These funds offer professional management and diversification of the funds invested. Mutual funds assets in 1990-2000 rose from 1.065 trillion to a whooping 6.965 trillion dollars. 10% Americans owned funds in 1980 and by 2000, the percentage increased to 49%.

What are Mutual funds?

A company dealing in mutual funds invests the money of several investors in bonds, stocks, securities, assets and several other short-term money-market instruments. The combined holdings owned by the mutual fund are known as its portfolio.

When you invest in a mutual fund you become a shareholder of the company. Each share in a mutual fund company is the representation of he investor's proportionate ownership of the fund holdings and the income generated. You earn dividends when the mutual fund company earns a profit, however, your shares will decrease in value if it faces a loss. A professional investment manager does the buying and selling of securities for the growth of the fund.

Types of mutual funds:

Equity funds: These funds involve only common stock investments. They can earn a lot of profit, but are also very risky.

Fixed income funds: They include corporate and government securities. These funds offer fixed returns at a low risk.

Balanced funds: This is the combination of bonds and stocks with a low risk. However, the investment does not earn a lot through these funds.

How it works?

Mutual fund shares can be purchased from the company itself or a broker. There are secondary market investors also, like the New York Stock Exchange. Per share net asset value of the funds or NAV is the price that you pay for buying a mutual fund share. It also includes the shareholder fee that is imposed by the fund, at time of purchase.

The best feature of mutual funds is that these shares are redeemable. You, as an investor, can sell your shares back to the broker. In order to accommodate new investors, mutual fund companies generally create new shares and sell them. They keep selling their shares continuously till they become large.

Investment advisers act as separate entities and are responsible for managing the investment portfolio of the mutual funds. Investing in mutual funds tends to lower the risk factor because they are the result of diverse investments.

Since someone else manages your investments, you need not worry about keeping constant tabs on the investment, though a periodical check enhances your personal book of accounts. Managing funds is the full time job of the fund manager and he is responsible for the performance and health of the investment.

The rate of returns in mutual funds is based on the increase or decrease of the value, during a specific period. Returns of a fund indicate the track record. It is important to remember that the past performance cannot guarantee future results.

As in the case of any investment or business, mutual funds also have risks associated with the returns. It is essential to set your financial goals and requirements, before investing in a mutual fund.

An IRA is an Individual Retirement Account, which provides either a tax-deferred or a tax-free way of saving for future retirement. There are many varied forms of accounts within the world. Depending on the superb financial goals and situations of each individual, though maybe Long-established IRA and Roth IRA are the more familiar choices.

An Individual Retirement Account, or an IRA, is a special tax-advantaged account that allows you to build savings for your retirement. One of the basic benefits of an IRA is that your investments earnings compound is tax-deferred. Other potential tax benefits are tax-deductible contributions or, expression within the case of the Vantage point Roth IRA, tax-free withdrawals.

A long-established IRA allows tax-deductible contributions for up to $4,000 per year, and also in most cases, if you or someone that understands and has expert knowledge is over the age of 50 years.

Whatever you contribute towards your account comes off your yearly income, thus reducing total tax liability. However, once the money in an account is withdrawn, it is subject to standard income taxes and an additional 10% penalty if withdrawn before the age of 59 1/2.

An exception is made if the money is new for purchasing a house or to cover any official higher education costs. Standard income tax still applies, but the 10 percent penalty is waived off. This provides a magnificent investment tool with flexibility for important purchases in IRA.

IRA in brief:

Roth IRA was created in 1997 to help middle-class Americans. These accounts are not tax-deductible, but yet provide even better flexibility than most common accounts. Assistance to the account can be inhibited at any time without being subject to penalty or tax, though interest earned resource within the account is.

After a period of five years, both contributions and earnings aspect element within the account can be withdrawn without penalty or taxation. The same benefits concerning education and housing also apply as with the most common IRA.

A Roth IRA isn't for everyone, although individuals who file taxes using a single status are eligible for the full contribution as long as they don't go above $95,000 per year in earnings, and $110,000 for partial contributions.

Joint filers face an earnings cap at $150,000 and $160,000 for full and partial contributions respectively. High-level corporate executives do not have to apply for this special class of account.

Choosing an account can be a very complicated decision, depending on the magnificent financial situation and can require the services of a certified financial planner. Another important decision can be whether or not to turn over a long-established account into the used Roth IRA.

Frankly speaking, if the person is eligible, then contributing to a Roth account is always more advantageous for the fact that income taxes will not apply later when the money is taken out, provided the person adheres to all the set guidelines.

But always be sure there is enough time to absorb the costs of the rollover, since it will be taxed. If you or someone that understands and has expert knowledge were taking the money out of the IRA.

A Most Common IRA Can Be Converted To A Roth IRA By The Following Methods:

Rollover, a distribution from a most common account can be contributed to a Roth IRA within 60 days after distribution.

Trustee-to-trustee transfer, the financial institution holding the well established retirement account assets would provide directions on how to transfer those assets to a Roth account with another financial institution.

Same trustee transfer, as with the trustee-to-trustee transfer, the financial institution holding the well-established account assets will provide directions on how to transfer those assets to a Roth. In such a case, things would be simpler because the transfer occurs within the same financial institution.

A conversion results in taxation of any untaxed amounts element within the long-established account terms. Also, the conversion is reported on Form 8606, Nondeductible IRA.

The most significant advantage of Roth is that while investors contribute to them on an after-tax basis, they have the possibility to withdraw their earnings on a tax-free basis, assuming sure conditions are met.

The ability to make a full contribution of $4,000 to a Roth is limited to employees with a modified adjusted gross income (MAGI) of below $95,000 (single tax filing status) or $150,000 (joint filing status).

Traditional IRA'S investors realize the greatest tax advantage from long-established when they can make contributions on a deductible pre-tax basis. Yet, many public sector employees are not eligible to make fully deductible pre-tax contributions to a most common IRA.

In many cases, if you are an active participant in an employer-sponsored retirement plan then you must have modified adjusted gross income (MAGI) below established limits in order to make fully deductible contributions to a well-established account.

If you or someone you know and/or your spouse do not actively participate in an employer-sponsored retirement plan, you can make fully deductible contributions to a well-established IRA no matter what of your MAGI.

A Mutual Fund can be termed as a form of a collective investment that collects money from many investors and invests the money into stocks, bonds, short-term money market instruments, and / or other securities.

In this type fund, the fund manager trades the fund's underlying securities, realizing their capital gains or loss, and collects the dividend or say the interest income. The investment earnings are then passed along to the individual investors.

The value of a share of the Mutual Fund, known as the net asset value (NAV), is calculated daily based resting on the total value of the fund divided by the number of shares purchased by investors.

Usage Of A Mutual Fund

In this type fund can invest in many different kinds of securities. The most well known are cash, stock, and the bonds, but there are hundreds of sub-categories. Like the stock funds, for instance, can invest primarily within the shares of a particular market, technology or utilities.

These are known as the sector funds. A Mutual Fund bond can vary according to the level of risk like the high yield or the junk bonds, investment grade corporate bonds, sort of issuers mainly the government agencies, corporations, or the municipalities.

The maturity of the bonds maybe short or long term. Both stock and bond funds can invest in primarily the US securities domestic funds, or the combination of both US and foreign securities that is the global funds, or primarily foreign securities like the international funds.

Most Funds investment portfolios are frequently adjusted under the supervision of an expert professional manager, who then forecasts the future performance of investments apt for the Mutual Fund and chooses the ones, which he or she believes, will most closely match the Funds stated investment objective.

A Mutual Fund is administered through a parent management company, which has all the rights to hire or fire fund managers.

These Funds are subject to a special set of regulatory, accounting, and tax rules. Dissimilar to most other types of business entities, the Mutual Fund is not taxed on their income as long as they distribute substantially all of it to their shareholders.

The sort of income they earn is often unchanged as it passes through to the shareholders. Fund distributions of tax-free municipal bond income are also tax-free to the shareholder. Taxable distributions can either be of the ordinary income or capital gains, depending on how the fund has actually earned it.

Types Of Mutual Funds

Mutual Fund can be distributed into the following types.
1) Open-end Fund
2) Exchange-traded funds
3) Equity Funds.
4) Bond Funds.
5) Money market Funds.
6) Hedge Funds.

Mutual Fund vs. Other Investments

Funds offers several advantages over the stock investments, including the diversification and professional management. A Mutual Fund can hold many investments in a relatively large number, namely hundreds or thousands of stocks, thus reducing the risk of any particular stock.

Also, the transaction costs associated with purchasing the individual stocks are also spread around among all the fund shareholders. A Mutual Fund benefits from professional fund managers who can apply their professional expertise and dedicate time to research the investment options.

These Funds, however, are not at all immune to risks. Mutual Fund shares the same risks associated with the types of investments the fund makes, that is, mainly invests in stocks. These Funds are typically subject to the same ups and downs and risks as the stock market.

Selecting A Mutual Fund

Selecting a Fund from among the thousands that are offered is not easy. The following is just a rough guide, with some common pitfalls.

Always review with your tax advisor before investing in a tax-exempt or tax-managed fund. Match the term of the investment to the time you expect to keep it invested. You may always need money until you retire in decades (or for a newborn's college education) would be in longer-term investments, for instance stock or bond funds.

Putting money you will need soon in stocks risks having to sell them when the market is low and missing out on the magnificent rebound.
The charges do matter over the long term, economical is typically better.

While selecting a Mutual Fund you can most defiantly settle on the expense ratio countenance within the prospectus. Expense ratios are critical in index funds, which seek to match the markets. Actively managed funds need to pay the manager, so they usually have a higher expense ratio.

Sector funds often make the "unsurpassed fund" lists you see every single year. The problem is that it is typically a different sector each year. Also, some sectors are vulnerable to market-wide events. Avoid making these a large part of your portfolio.

Mutual Fund often makes taxable distributions near the end of the year. If you or someone you know plan to invest money countenance within the fund in a taxable account, review the fund company's website to see when they plan to pay the dividend; or you can prefer to wait until afterwards if it is coming up soon.

Research. Read the prospectus, or as much of it as you can most defiantly stand. It could tell you what these strangers can do with your money, among other vital topics. Also, review the return and risk of a fund against its peers with similar investment objectives, and against the index most closely associated with it.

Be sure to pay attention to performance over both the long-term and the short-term before deciding on a Mutual Fund.

Since its inception in 1998, the Roth IRA, ("Roth" for its legislative sponsor, the late Senator William Roth, and "IRA" for individual retirement account), has been one of the most popular retirement vehicles in the United States.

The Roth IRA is particularly useful for hands-on investors and the self-employed, but almost everyone can benefit from opening and fully-funding a Roth IRA.

A Roth IRA is a legally tax-sheltered savings and investment account. Qualifying individuals can put up to $4,000 per year into their Roth IRA's, and all money invested is allowed to grow completely tax-free.

Whereas a traditional IRA features the benefit of tax-deductible contributions, a Roth IRA uses after-tax money. However, withdrawals from a traditional IRA, which can begin at age 59 1/2, are fully taxed at the accountholder's personal income tax rate, whereas withdrawals from a Roth IRA are 100 percent tax-free.

This means that if a person began saving $4,000 per year at age 22 and earned an average annual return of 9 percent, she could retire at 59 1/2 with over $1 million in her Roth IRA--and the government wouldn't see a dime!

It is also important to note that while investment earnings cannot be withdrawn from a Roth IRA until age 59 1/2 without substantial penalty, (except in special cases, such as a first-time home purchase), the principal put into a Roth IRA can be taken out at any time for any reason. This gives the Roth IRA more flexibility than most other retirement accounts.

Income Restrictions For Using a Roth IRA

So what's the catch? There really isn't much of one, unless you don't earn any income or simply make too much money in the eyes of the government. "Earned income," as defined by the IRS, refers only to wages, salary, and self-employment earnings.

People who earn less than $4,000 by these measures are unable to take full advantage of a Roth IRA--a person can't invest more into his account than he earns in a given year.

On the other end of the financial spectrum, individuals who make more than $95,000 or married couples filing jointly who make more than $150,000, (as determined by "MAGI" or Modified Adjusted Gross Income, a complex formula created by Congress to prevent abuse of Roth IRA's by the wealthy), face a sliding scale of restrictions.

Ultimately, individuals who earn more than $110,000 or married couples with income in excess of $160,000 are completely unable to use Roth IRA's, however, if your income should ever reach such lofty levels, any prior investments into a Roth IRA remain tax-sheltered.

It's also important to note that couples who make less than $150,000 are allowed to invest up to $8,000 into a joint Roth IRA, even if only one spouse works outside of the home.

Investment Strategies Within a Roth IRA

Although most commonly invested in stocks, bonds, or mutual funds, money within a Roth IRA can be invested in almost anything, including real estate. One asset class that should be avoided is municipal bonds.

This is because the primary advantage of municipal bonds is their tax-exempt status, and since all investments within an IRA are tax-exempt, capital would be better allocated in securities that are normally taxable, and thus offer higher returns than municipals.

Roth IRA's are great for hands-on investors who like to engage in active trading because there are no capital gains tax consequences within an IRA, and the higher short-term capital gains taxes on securities held for less than one year often take a serious bite out of trading profits in non-tax-sheltered accounts.

However, certain investment products and strategies favored by active traders, such as options and shorting stock, are prohibited within IRA's, with the exception of writing covered calls.

The Ownership Society

Finally, it is important to note that if your employer sponsors a retirement plan such as a 401(k), you are still eligible to open and manage your own Roth IRA, whereas you are not allowed to have both a 401(k) and traditional IRA. This is yet another advantage that makes the Roth IRA right for almost everyone.

So if you haven't already opened a Roth IRA, you probably should. The maximum annual contribution goes up to $5,000 in 2008, and with defined-benefit pensions on the decline and the future of Social Security uncertain, self-directed retirement vehicles like the Roth IRA may be the only way for today's workers to retire comfortably.

The power of compound interest means that beginning to save while you're young makes a huge difference--but it's never too late to start. The law even allows people age 50 and over to make special "catch-up" contributions to their Roth IRA's.

And best of all, unlike Social Security and many corporate-sponsored retirement plans, you are the owner of your Roth IRA. Not only can a Roth IRA provide for a comfortable, potentially luxurious retirement for you and your spouse, but also something to pass on to your family or favorite charity.

While there are certainly both pros and cons to the proposed "Ownership Society," the Roth IRA is virtually all positive.

Mutual funds are one of the financial world's most popular investment vehicles, and for good reason.

For a relatively small investment, these funds give individual investors the ability to buy a diverse portfolio of stocks and / or other financial instruments - all in one transaction.

If you have just two or more mutual funds, chances are that you're more than adequately diversified. This means that you don't have to worry about one bad apple (i.e. Enron) destroying your entire investment account.

How Mutual Funds Work

So how do these funds work? Each fund is actively managed by a mutual funds professional. This is someone who has several years of experience analyzing and trading stocks or other securities, probably has an advanced degree, and has worked his or her way up the ladder to what is essentially the top of the money management profession.

The fund manager chooses the securities that the mutual fund owns. These funds can be composed of stocks, bonds, and / or other financial instruments.

The types and balance of securities (i.e. 60 percent stocks, 35 percent bonds, 5 percent cash / money market), and the investment objectives and strategies (i.e. aggressive growth or equity income) are listed in the mutual fund's prospectus.

This way investors know what they are getting into each time they buy new mutual funds.

Mutual funds are split into shares, just like stocks. For example, a fund may own 5,000 shares of Microsoft (MSFT); 10,000 shares of General Motors (GM); 20,000 shares of Alcoa (AA), etc., and be split into 100 million shares itself.

If the net asset value (NAV) of the shares is $1 billion, then each share of the fund would be worth $10. The fund manager buys and sells shares of stock that the fund owns - you, in turn, can buy or sell your shares of the fund, but only at the end of each trading day.

No Load Mutual Funds vs. Load Mutual Funds

So what's the catch? Well, mutual fund managers have to be compensated for their services, so they charge you a fee which is sometimes called a "load."

Essentially, you are paying them to have the heartburn and ulcers associated with watching the stock market eight hours a day, 52 weeks a year, so that you don't have to. Whether or not the fund managers earn their keep depends on how skillful they are, and how the fund's fees are structured.

Load mutual funds charge either front-end loads or back-end loads. Front-end loads charge you a percentage of your initial investment.

For example, if you invest $10,000 each into a pair of front-end load funds with loads of 3 percent and 5 percent, you will only be investing $9,700 and $9,500, respectively. How long will it take your funds to make up the $800 you've lost right off the bat?

Instead of charging you up front, back-end load funds don't charge you a load until you withdraw your money.

These funds are usually a better deal, because the size of the loads usually decreases the longer you leave your money in the fund.

For example, a back-end load fund might have a load of 7 percent if you withdraw your money the first year, with the load going down by 1 percentage point each year, and reaching 0 percent by the eighth year.

Mutual Funds - Just Say No To Your Broker; Buy Direct Instead

Typically, full-service brokers with offices on Main Street only sell front-end load funds. This is because they receive an up-front commission on the sale of these products.

Mutual funds are designed for average investors - you don't need a broker to recommend these funds for you, and you don't need to pay the extra sales charges.

There are hundreds of good, no-load funds that charge only a small annual management fee (which load mutual funds charge in addition to their loads) available directly from fund companies.

Most funds have a minimum investment of $2,500, but this can usually be waved if you commit to regular monthly investments of as little as $50.

Passive investment management may be the Rodney Dangerfield of financial strategies--it gets no respect. Active investment strategies have had the spotlight so long, some investors may be surprised to find there is an alternative to stock picking, market timing and other faster-paced, more glamorous methods.

Active investment management uses research, investigation and analysis to select investments that the selector believes will outperform the general market indexes. Passive investment management invests in broad market sectors and accepts the average returns those sectors produce.

The research, investigation and analysis inherent in active investment management come at a cost. Active management usually results in higher turnover within the portfolio, potentially generating trading costs, commissions and taxes. Those costs should be calculated against the higher gains that active investing may have over a passive strategy; in other words, is the potential for additional gain worth the near-certainty of additional cost.

Passive investing seeks to take some of the prognostication out of the investment process, as well as the possible emotional impact. Daily evaluation and re-evaluation of investments can cause you to overlook more subtle trends and to lose sight of your personal big picture. It's easy to get caught up in the next great investment pick or strategy. Ignoring the hype in favor of the buy-and-hold tactic may help keep your portfolio on course.

Passive investment management does not, however, mean purchasing investments and then ignoring them. Your portfolio will need to be rebalanced periodically to make sure those sectors performing better than expected don't become too great a share of your invested assets. Changes in your personal life (marriage, children, divorce, death of a spouse) may also necessitate changes to your investment plan.

Neither does it mean foregoing the assistance of an investment professional or financial advisory team. These professionals should help you determine your investment goals, the amount of money needed to reach them and the best strategies for accumulating that money. They play an important role in keeping you on the right course, especially when deviating becomes most tempting.

All investments involve risk, whether selected as part of an active strategy or a passive one. Passive investing does not "loss-proof" your portfolio. On the flip side, past success is not indicative of future performance, as active-style proponents might have you believe.

In the end, you have to weigh the lower costs, style consistency and tax efficiency of a passive investment strategy against the potential greater returns of an active investment strategy. Your financial advisor can play an important role in helping you determine which style best suits your investment time horizon, risk tolerance and investment experience.