2. Tactical Asset Allocators: A tactical asset allocator uses an active investment strategy and typically invests in mutual funds such as sector funds. For example, AlphaProfit uses its ValuM investment process, http://www.alphaprofit.com/mutual-fund-selection.html to periodically alter mix of its mutual fund model portfolios to take advantage of specific trends (e.g. rising natural gas prices, introduction of new wireless technologies).

Since tactical asset allocators seek superior performance during their mutual fund holding period, factors such as superior long-term performance which determine Morningstar Ratings are less important to them. However, these investors typically seek to own mutual funds within a single family such as Fidelity Investments for purposes of administrative ease. As such, tactical asset allocators will find Fiduciary Grade useful in evaluating and choosing mutual fund families to implement their strategies.

Our Take on Morningstar Fiduciary Grade System

The Fiduciary Grade system is a blend of several metrics. The grading of mutual funds on regulatory issues is backward looking rather than a prognosticator of potential future trouble. The grading system includes a quantitative dimension in mutual fund fees. Also included are qualitative dimensions such as mutual fund corporate culture, manager incentives, and board quality.

The Mutual Fund Fiduciary Grade ranking provides mutual fund investors with much needed insight on governance and operations of mutual funds. The Morningstar Fiduciary Grade System is a good first step. We believe Morningstar will refine Mutual Fund Fiduciary Grade system over time, just as they refined Morningstar Ratings system.

While Morningstar Ratings do an excellent job of objectively evaluating past performance, financial markets by their very nature do not allow investor to predict future performance based on these ratings alone. Many times, funds with Morningstar Ratings of 4- or 5-star do not live up to their expectations.

The utility of Morningstar Fiduciary Grade will be significantly enhanced if superior Fiduciary Grade either by itself or in combination with Morningstar Rating becomes a better indicator of superior future performance. We believe Morningstar Fiduciary Grade has potential to become a worthy metric of mutual fund stewardship over time.

Notes: This report is for information purposes only. Nothing herein should be construed as an offer to buy or sell securities or to give individual investment advice. This report does not have regard to specific investment objectives, financial situation, and particular needs of any specific person who may receive this report. The information contained in this report is obtained from various sources believed to be accurate and is provided without warranties of any kind. AlphaProfit Investments, LLC does not represent that this information, including any third party information, is accurate or complete and it should not be relied upon as such. AlphaProfit Investments, LLC is not responsible for any errors or omissions herein. Opinions expressed herein reflect opinion of AlphaProfit Investments, LLC and are subject to change without notice. AlphaProfit Investments, LLC disclaims any liability for any direct or incidental loss incurred by applying any of information in this report. Morningstar Rating™ is a trademark of Morningstar, Inc. The third-party trademarks or service marks appearing within this report are property of their respective owners. All other trademarks appearing herein are property of AlphaProfit Investments, LLC. Owners and employees of AlphaProfit Investments, LLC for their own accounts invest in Fidelity Mutual Funds. AlphaProfit Investments, LLC neither is associated with nor receives any compensation from Fidelity Investments. Past performance is neither an indication of nor a guarantee for future results. No part of this document may be reproduced in any manner without written permission of AlphaProfit Investments, LLC. Copyright © 2004 AlphaProfit Investments, LLC. All rights reserved.

It’s vital to know that your credit score affects your ability to get loans, car loans, and home mortgages. Future jobs and insurance premiums can also be influenced by your credit score. By paying your bills in full or in a timely manner, a credit card will help you establish a good credit score. Late payment or no payment will help you earn a poor credit score. For more information on credit reports and scores and how they affect you, check out CardRatings.com.

Developing a new view about credit

Mary Ann Campbell, CFP, founder of MoneyMagic.com and a money educator, cites unrealistic expectations as a major reason for high student debt.

Campbell, who teaches personal finance courses, says “Many students’ expectations of their earning potential after college far exceeds what their actual income will be.” She notes that some students use their credit cards with abandon during college, planning to pay off their debt when they land that great job after college. Indeed, some students forget that in order to get to top of career ladder, there are a few rungs, i.e., less paying jobs, they have to climb first. And expense of starting a new job and life on your own can just add to existing debt.

Manning’s website, CreditCardNation.com, contains a great resource for students seeking a more realistic view of first few years after college. Using ‘Budget Estimator,’ a module designed by Manning, students can identify an average yearly or monthly starting salary for jobs in their particular major. The program automatically figures in estimates for taxes and social security payments. Students can then plug in expenses for housing, car payments, utilities, food, insurance, telephone and internet bills, clothing, credit card bills, student loan payments, and entertainment, etc. The module lets you know when you have spent more money than you make, and allows you to adjust payments as necessary until you get hang of how your money is best distributed.

Students that seem to have most credit woes? Those who believe their standard of living during and after college should not vary from when they lived at home on their parents’ income. Cable television, cell phones with cameras, and new cars become ‘necessities’ instead of nice extras.

Advice to grow on

When it comes to credit cards, students have great advice for other students. Heather, a college junior from Arkansas, recommends getting one card with a low limit. “This limits amount of credit you have access to and therefore removes temptation to spend more than you have or more than you can pay off immediately,” she says.

Another student recommends selectivity. “Don’t sign up for a card that charges an annual fee to use it, and read terms of card before applying. You wouldn’t believe how many people don’t know what an APR rate is.” For more information on finding best rated cards, check out CardRatings.com. You can read reviews of cards from other students and get lowdown on perks of various credit cards.

Campbell has three recommendations for students: The first is open communication. Campbell says students who are educated about financial matters seem to have a better overall attitude regarding credit cards. Students should find a trusted source to talk openly with about money issues. Second, students should switch from spending behaviors (such as shopping) to activities that help you achieve same feeling of gratification or reward, such as intramurals, exercise or campus organizations.

Last, but certainly not least, enroll in a personal finance course as soon as your schedule allows. Says Campbell, “If it’s not required coursework, take it as an elective. You will learn a set of life skills that will not only help you right now, but also after college and for rest of your life.”