How to beat the mutual fund companies at their own game

Written by Ulli G. Niemann


You'd have had to be living on a desert island with no TV, newspaper or internet connection to have missed hearing aboutrepparttar great mutual fund scandal of 2003.

The issue was that some mutual fund companies allowed certain hedge funds to engage in after-hours trading, sometimes incorrectly referred to as market timing. Unfortunately, some companies have usedrepparttar 112548 confusion aboutrepparttar 112549 term "market timing" to further their own cause. How?

They have used this issue to pretty much ban all forms of trading their funds, and some companies are imposing hefty short-term redemption fees—penalties for all intents and purposes—inrepparttar 112550 name of avoiding impropriety. Butrepparttar 112551 real idea behind it all is: Buy our fund and never sell it!

These companies advocate a stubborn Buy & Hold philosophy despiterepparttar 112552 devastating effects that approach had on investors’ portfolios duringrepparttar 112553 recent bear market. Performance is immaterial to them—they want your money in their fund whether it's going up or down.

With all ofrepparttar 112554 negative press overrepparttar 112555 months you'd think that mutual fund companies would have cleaned up their act and started giving more consideration torepparttar 112556 individual investor. Not so.

This was brought home to me when a fund manager of an $800 million mutual fund called me to see what my plans were in respect to holding our positions with his fund (about $2 million).

I explained my trend tracking methodology and he got very angry when he heard I would protect my clients' accumulated profits by selling his fund if it were to drop 7% off its highs.

His blustering made it quite clear that he did not like anyone managing forrepparttar 112557 benefit of their clients; he only cared about what was best for him and his company.

Using an LLC to Protect Your Wealth

Written by James O'Keefe


Bulletproof" Your Wealth with Family Limited Partnerships and LLC's

A limited partnership is a partnership that has at least one limited partner and one general partner. Most states requirerepparttar filing of a certificate withrepparttar 112547 state in order to be recognized as a limited partnership.

The limited partners generally have no liability beyond their contribution torepparttar 112548 partnership. Ifrepparttar 112549 limited partnership business fails,repparttar 112550 creditor cannot go afterrepparttar 112551 limited partners for debts (there are a few minor exceptions to this rule that are not difficult to avoid). Furthermore, limited partners are not personally liable for wrongful acts committed byrepparttar 112552 other partners. In exchange for this limited liability,repparttar 112553 limited partners give up their right to participate inrepparttar 112554 control and management ofrepparttar 112555 partnership.

The general partners runrepparttar 112556 management ofrepparttar 112557 partnership. The general partners controlrepparttar 112558 cash distributions torepparttar 112559 partners. The general partners also have unlimited liability, as in a general partnership. Creditors ofrepparttar 112560 partnership can look torepparttar 112561 general partners' personal assets ifrepparttar 112562 limited partnership's assets are insufficient. Furthermore,repparttar 112563 general partners are liable to third parties for wrongful conduct withinrepparttar 112564 partnership business (e.g., a "slip and fall lawsuit"). Thus, a corporation is usually better for pure liability protection for its owners.

The limited partnership does not pay taxes as an "entity." It files an informational tax return torepparttar 112565 IRS. It issues a form K-1 torepparttar 112566 partners who includerepparttar 112567 partnership income or loss on their personal tax returns. The partners must pay income tax on all gains whether or notrepparttar 112568 profit is distributed.

Creditors of individual partners cannot take a partner's place inrepparttar 112569 partnership. A creditor may garnishrepparttar 112570 partner's share of income (called a "charging order"), but has no right to participate inrepparttar 112571 management or utilize partnership property. Thus, if a limited partner's income is garnished by a creditor,repparttar 112572 general partner (who should be underrepparttar 112573 limited partner's control) can frustraterepparttar 112574 creditor by not distributing income torepparttar 112575 partners. Since a partner is required to pay taxes on his share ofrepparttar 112576 income whether or notrepparttar 112577 income is distributed, guess who getsrepparttar 112578 tax bill? You guessed it,repparttar 112579 creditor! If your assets are held in a limited partnership, they are virtually judgment-proof!

The Family Limited Partnership

Let's look at a variation known as a "family" limited partnership. Suppose that you and your spouse create a limited partnership to hold your family's liquid assets. Your limited partnership contributions are all of your stocks, cash, CD's and mutual funds totaling $300,000. Your partnership agreement could state that your spouse will act as general partner with a 2% share (the size ofrepparttar 112580 general partnership share does not affectrepparttar 112581 general partner's power to managerepparttar 112582 partnership's affairs). You agree in writing that your contributions constitute a 98% limited partnership interest.

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