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Investment Basics

Ameristock Mutual Fund
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Questions and Answers

  What is a mutual fund?
  Why do people use mutual funds?
  Are there disadvantages to investing in a mutual fund?
  What is "Net Asset Value"?
  Can mutual fund performance be guaranteed?
  What is a prospectus?
  What do mutual funds invest in?
  What is a "load"?
  Where can I get comparative information on mutual funds?
  How do I put a mutual fund in an IRA?

What is a mutual fund?
A mutual fund is an investment corporation that chooses groups of stocks and sells shares of itself as a single investment, or package. The Fund, or corporation, passes the gains, losses and taxability along to its shareholders, offering the advantage of owning a variety of stocks as a way to lower an investor's risk, gain diversification and hire professional money management.
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Why do people use mutual funds?
Mutual funds provide diversification (an investment term for "not putting all your eggs in one basket"). A fund typically owns a few dozen to hundreds of stocks. Also, by pooling funds from many investors, full-time professional money managers can be hired to oversee the investments. Most people cannot afford to actively invest and monitor their investments on a full-time basis.
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Are there disadvantages to investing in a mutual fund?
Almost every investment in the market involves a certain amount of speculation and risk. Mutual funds are no exception. For example, the purchase of fund shares at the wrong time can subject the buyer to varying tax consequences. We recommend you speak with a qualified tax advisor about how your participation in a mutual fund can affect your tax liabilities. There are also expenses related to fund management and brokerage charges that vary from fund to fund.
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What is "Net Asset Value"?
The Net Asset Value (NAV) is the current value of a share in a mutual fund and is computed by dividing the value of the Fund's net assets by the total number of outstanding shares. The NAV is calculated at the end of each trading day so that investors can put their money in or get it out on a daily basis.
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Can mutual fund performance be guaranteed?
No. Like any investment, mutual fund performance is subject to a wide variety of market conditions and past performance is no guarantee of future results. Fund shares are neither backed nor guaranteed by the FDIC or any other government agency.
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What is a prospectus?
A prospectus is a document containing descriptions of the fund's operations, including: fees, investment objective, how to buy & sell shares, investment manager, risks, dividend distributions, and other services. A mutual fund is required to provide a prospectus to investors. We urge you to read the prospectus carefully before investing or sending money. You may download an Ameristock Funds prospectus here.
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What do mutual funds invest in?
Almost anything, though many have strategies that direct their investments to different areas. For example, the Ameristock Mutual Fund invests in large, American companies. Other funds invest in small companies, overseas companies, bonds, money markets...almost anything investors could want to invest in. That's why it's important to match your goals and risk tolerance to the different types of funds available.
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What is a "load"?
A "load" is a sales charge that a broker or financial advisor charges for their service. "Front-end" loads take their fee when you buy the fund and "Back-end" loads take their fee if you get out early, or in the form of a 12b-1 fee. Note: The Ameristock Mutual Fund is a "no-load" fund: there are no sales charges for buying into it or selling out your shares.
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Where can I get comparative information on mutual funds?
Brokers and financial advisors offer information, but they usually give information only about load funds. However, many newspapers and magazines (Barron's, Money, Forbes, Fortune, Business Week, Mutual Funds Magazine, Smart Money) cover mutual funds regularly and have special issues annually reviewing the best funds. Also, there are a number of online resources that offer comparisons of the various funds available.
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How do I put a mutual fund in an IRA?
Most funds have a bank or trust company arranged to be an IRA custodian for any IRA shareholders. The custodian usually charges between $15 and $25 per fund account per year. This can often be a significant expense for small accounts.

Alternatively, you can purchase mutual funds within a brokerage account IRA. This would be similar to using a broker to buy funds normally, but incurs a single IRA custodian fee (usually between $25 and $50). See your tax planner or financial advisor about the best way to invest using IRAs. Note: Ameristock does not have its own IRA accounts. To invest in Ameristock through an IRA please request an IRA kit from firms such as TDWaterhouse, Schwab, Fidelity or eTrade.
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