query: Credit and Debit

positive: It took me a while to understand the concept, so I'll break it down as best as I can.  There are three parts to the accounting equation: Assets = Liabilities + Owner's Equity We'll look at this in two ways   1. As a business owner you invest (say) 10,000 USD into your bank. The entry would be: Debit: Assets: Cash for 10,000    Credit: Owner's Equity: Contributions for 10,000 In this case, you have assets of 10,000 from your deposit, but it is due to owner contributions and not business transactions. Another example (say a sale):  Debit: Assets: Cash for 10,000    Credit: Owner's Equity: Sales for 10,000 Debit: Assets: Cash for 10,000    Credit: Liabilities: Deposits for 10,000 Deposits are a banking term to reflect a bank's obligation to return the amount on demand (though the bank has free reign with it, see fractional banking)  You will NEVER debit or credit your bank as it is assumed you will be storing your money there, note bank reconciliation. Hope this helps, comment with any more questions.

positive: In view of business, we have to book the entries. Business view, owner and business are different. When capital is invested in business by owner, in future business has to repay it.  That's why, capital always credit. When we come about  bank (business prospective) - cash, bank, fd are like assets which can help in the business. Bank is current asset (Real account) - Debit (what comes into the business)                                        Credit (what goes out of the business) Hence credit and debit differs from what type of account is it.... credit - when business liables debit - what business has and receivables

negative: "From your question, I believe that you are looking for what these mean in accounting terms and not the difference between a debit and a credit card. I'll deal with purchase and sale first as this is easier. They are the same thing seen from different points of view. If I sell something to you then I have made a sale and you have made a purchase. Every sale is a purchase and every purchase is a sale. Debits and Credits are accounting terms and refer to double column accounting (the most common accounting system used). The way a set of accounts works is, accounts are set up under the following broad headings: The first 3 appear on the Balance Sheet, so called because the accounts balance (Assets = Liabilities + Equity). This is always a ""point-in-time"" snapshot of the accounts (1 June 2015). That last 3 appear on the Profit and Loss sheet, Profit (or loss) = Income - Cost of Goods Sold - Expenses. This is always an interval measure (1 July 2014 to 30 June 2015). Changes in these accounts flow through to the Equity part of the Balance Sheet. When you enter a transaction the Debits always equal the Credits, they are simply applied to different accounts. Debits increase Assets, Cost of Goods Sold and Expenses and decrease Liabilities, Equity and Income. Credits do the reverse For your examples: 1. a customer buy something from me, what is the debit and credit? I will assume they pay $1,000 and the thing cost you $500 Your cash (asset) goes up by $1,000 (Debit), your inventory (asset) goes down by $500 (Credit), your Sales revenue (income) goes up by $500 (credit). This gives you a profit of $500. 2. a customer buy something of worth 1000 but gives me 500 what is     debit and credit Your cash (asset) goes up by $500 (Debit), your debtors (asset) goes up by $500, your inventory (asset) goes down by $500 (Credit), your Sales revenue (income) goes up by $500 (credit). This also gives you a profit of $500. 3. if I buy a product from supplier worth 1000 and pay equally what is credit and debit I assume you mean pay cash: Your cash (asset) goes down by $1000 (Credit), your inventory (asset) goes up by $1000 (Debit). There is no profit or loss here - you have swapped one asset (cash) for another (inventory). 4. if I buy a product from supplier worth 1000 and don't pay what is credit and debit Your creditors (liability) goes up by $1000 (Credit), your inventory (asset) goes up by $1000 (Debit). There is no profit or loss here - you have gained an asset (inventory) but incurred a liability (creditors). The reason for confusion is that most people only see Debits and Credits in one place - their bank statement. Your bank statement is a journal of one of the banks liability accounts - its their liability because they owe the money to you (even loan accounts adopt this convention). Credits happen when you give money to the bank, they credit  your account (increase a liability) and debit their cash balance (increase an asset). Debits are when they give money to you, they debit your account (decrease a liability) and credit their cash balance (decrease an asset) . If at the end of the period, you have a credit balance then they owe money to you, a debit balance means you owe money to them. If you were keeping a book of accounts then your record of the transactions would be a mirror image of the bank's because you would be looking at it from your point of view."

negative: "You ask about the difference between credit and debit, but that may be because you're missing something important. Regardless of credit/debit, there is value in carrying two different cards associated with two different accounts. The reason is simply that because of loss, fraud, or your own mismanagement, or even the bank's technical error, any card can become unusable for some period of time. Exactly how long depends what happened, but just sending you a new card can easily take more than one business day, which might well be longer than you'd like to go without access to any funds. In that situation you would be glad of a credit card, and you would equally be glad of a second debit card on a separate account. So if your question is ""I have one bank account with one debit card, and the only options I'm willing to contemplate are (a) do nothing or (b) take a credit card as well"", then the answer is yes, take a credit card as well, regardless of the pros or cons of credit vs debit. Even if you only use the credit card in the event that you drop your debit card down a drain. So what you can now consider is the pros and cons of a credit card vs managing an additional bank account -- unless you seriously hate one or more of the cons of credit cards, the credit card is likely to win. My bank has given me a debit card on a cash savings account, which is a little scary, but would cover most emergencies if I didn't have a credit card too. Of course the interest rate is rubbish and I sometimes empty my savings account into a better investment, so I don't use it as backup, but I could. Your final question ""can a merchant know if I give him number of debit or credit card"" is already asked: Can merchants tell the difference between a credit card and embossed debit card? Yes they can, and yes there are a few things you can't (or might prefer not to) do with debit. The same could even be said of Visa vs. Mastercard, leading to the conclusion that if you have a Visa debit you should look for a Mastercard credit. But that seems to be less of an issue as time goes on and almost everywhere in Europe apparently takes both or neither. If you travel a lot outside the EU then you might want to be loaded down with every card under the sun, and three different kinds of cash, but you'd already know that without asking ;-)"

negative: "Your first and second paragraphs are two different cases. Moving money between a checking account and a savings account will credit Cash and debit Cash, making a GL transaction unnecessary, unless the amounts in the two bank accounts are tracked as two separate GL accounts. You might have account 1001 (Cash-Checking) and account 1002 (Cash-Savings). In that case, a movement of money between these two accounts should be tracked by a transaction between the GL accounts; credit checking, debit savings. It won't affect your balance sheet, but depending on your definition of liquidity of assets  it might affect working capital on your statement of cash flows (if you consider the savings account ""illiquid"" then money moved to it is a decrease in working capital). Basically, what you are creating with your ""store credit"" accounts for each client is an ""unearned revenue"" account. When clients pay you cash for work you haven't done yet, or you refund money for a return as ""store credit"" instead of cash, the credit is a liability account, balancing an increase in cash, inventory, or an expense (if you're giving credit for free, perhaps due to a mistake on your part, you would debit a ""Store Credit Expense"" account). This can be split out client-by-client in the GL if you wish, avoiding the need for a holding account. The way you want to do it, you'd have a ""Client Holding"" account. It must be unique in the GL and to the client, and yes, it is a liability account. To transfer to holding, you simply debit Unearned Revenue and credit Client Holding, logging the transaction as ""transfer of client store credit"" or similar (moving liability to liability; balance sheet doesn't change). Then, as you sell goods or services to the client, you debit Accounts Receivable and credit Revenue, then to record the payment you credit AR and debit Client Holding (up to its current credit balance, after which the client pays you Cash and you debit that, or the client still owes you). To zero out a remaining balance on the Holding account, debit Client Holding and credit Unearned Revenue. I don't think the Holding account, the way you want to use it, is a good idea. If you want to track each customer's store credit balance with a GL account, then create specialized Unearned Revenue accounts for each client who gets a store credit, named for the client and containing their balance (zero or otherwise). If you don't care about it at the GL level, then pool it in one Unearned Revenue account (have one Store Credit account if you must), and track individual amounts off the books."

negative: I am not sure if this is the actual reason or not, but all of the major credit cards (Visa, Mastercard, Amex, Discover) provide damage insurance coverage on car rentals. Debit cards do not usually provide this coverage. So, if you use a credit card, the car company knows it will be able to recover the cost of any damage to the car.  Of course, this doesn't explain some of the odd debit card policies out there. For example, Alamo will not let you use a debit card unless you provide proof of round trip travel (like a plane or cruise ticket). But you can use a credit card without having a travel ticket. I'm not sure how having a travel ticket makes debit card users less of a risk, but apparently it does somehow.

negative: Great effort on the question. All I can advise is: If paypal does not provide the mapping table (Type, Status, Credit/Debit) you will have to build it up yourself as you go along. I would tackle it this way: Your SQL mapping table has Credit/Debit entries for all knows combinations and the Credit/Debit entry would be -1 for all. Then, as you get a list of transactions you will have to display all possible results to the user who will then tick the correct one (comparing it to the balance). You would store the Credit/Debit entry if it is unique. This way you will learn what the possible combinations are over time. Its a to the nth problem, so maybe start with a small number of transactions first. I expect you can build up pretty quickly. It will be an interesting experiment...

negative: There are numerous reasons that go beyond the immediate requirement for access to credit.  Many people just plain don't like carrying cash. Before electronic debit cards became mainstream about the only way to pay for online services was with a credit card.  This has now changed just about everywhere except a large number of airlines which still only sell online tickets via a credit card payment. And then there are all those countries where governments (and some banks) have decided to charge merchants more when customers use debit cards.  If you don't like carrying cash then you may find that the only card you can use is a credit card. These concerns are gradually disappearing and at some stage someone is likely to offer a combined debit-credit card. At which point you'll probably get credit whether you like it or not.

negative: You could use a Credit or Debit Card running in US $, drawing from your US$ account, and pay everything with it. If you pick a company with free foreign conversions, you would get the standard interbank exchange ratio every time you pay, with no fee. For the small payments where credit cards are not accpeted or useful you can convert some cash once every some month - all significant amounts should work with credit or debit card.

negative: "Exactly what accounts are affected by any given transaction is not a fixed thing. Just for example, in a simple accounting system you might have one account for ""stock on hand"". In a more complex system you might have this broken out into many accounts for different types of stock, stock in different locations, etc. So I can only suggest example specific accounts. But account type -- asset, liability, capital (or ""equity""), income, expense -- should be universal. Debit and credit rules should be universal. 1: Sold product on account: You say it cost you $500 to produce. You don't say the selling price, but let's say it's, oh, $700. Credit (decrease) Asset ""Stock on hand"" by $500. Debit (increase) Asset ""Accounts receivable"" by $700. Credit (increase) Income ""Sales"" by $700. Debit (increase) Expense ""Cost of goods sold"" by $500. 2: $1000 spent on wedding party by friend I'm not sure how your friend's expenses affect your accounts. Are you asking how he would record this expense? Did you pay it for him? Are you expecting him to pay you back? Did he pay with cash, check, a credit card, bought on credit? I just don't know what's happening here. But just for example, if you're asking how your friend would record this in his own records, and if he paid by check: Credit (decrease) Asset ""checking account"" by $1000. Debit (increase) Expense ""wedding expenses"" by $1000. If he paid with a credit card: Credit (increase) Liability ""credit card"" by $1000. Debit (increase) Expense ""wedding expenses"" by $1000. When he pays off the credit card: Debit (decrease) Liability ""credit card"" by $1000. Credit (decrease) Asset ""cash"" by $1000. (Or more realistically, there are other expenses on the credit card and the amount would be higher.) 3: Issue $3000 in stock to partner company I'm a little shakier on this, I haven't worked with the stock side of accounting. But here's my best stab: Well, did you get anything in return? Like did they pay you for the stock? I wouldn't think you would just give someone stock as a present. If they paid you cash for the stock: Debit (increase) Asset ""cash"". Credit (decrease) Capital ""shareholder equity"". Anyone else want to chime in on that one, I'm a little shaky there. Here, let me give you the general rules. My boss years ago described it to me this way: You only need to know three things to understand double-entry accounting: 1: There are five types of accounts: Assets: anything you have that has value, like cash, buildings, equipment, and merchandise. Includes things you may not actually have in your hands but that are rightly yours, like money people owe you but haven't yet paid. Liabilities: Anything you owe to someone else. Debts, merchandise paid for but not yet delivered, and taxes due. Capital (some call it ""capital"", others call it ""equity""): The difference between Assets and Liabilities. The owners investment in the company, retained earnings, etc. Income: Money coming in, the biggest being sales. Expenses: Money going out, like salaries to employees, cost of purchasing merchandise for resale, rent, electric bill, taxes, etc. Okay, that's a big ""one thing"". 2: Every transaction must update two or more accounts. Each update is either a ""debit"" or a ""credit"". The total of the debits must equal the total of the credits. 3: A dollar bill in your pocket is a debit. With a little thought (okay, sometimes a lot of thought) you can figure out everything else from there."

negative: "A credit card is a way to borrow money. That's all. Sometimes the loans are very small - $5 - and sometimes they are larger. You can have a credit card with a company (bank or whatever) that you have no other relationship with. They're not a property of a bank account, they are their own thing. The card you describe sounds exactly like a debit card here, and you can treat your Canadian debit card like your French credit card - you pay for things directly from your bank account, assuming the money is in there. In Canada, many small stores take debit but not credit, so do be sure to get a debit card and not only a credit card. Now as to your specific concerns. You aren't going to ""forget to make a wire."" You're going to get a bill - perhaps a paper one, perhaps an email - and it will say ""here is everything you charged on your credit card this month"" along with a date, which will be perhaps 21 days from the statement date, not the date you used the card. Pay the entire balance (not just the minimum payment) by that date and you'll pay no interest. The bill date will be a specific date each month (eg the 23rd) so you can set yourself a reminder to check and pay your bill once a month. Building a credit history has value if you want to borrow a larger amount of money to buy a car or a house, or to start a business. Unlike the US, it doesn't really have an impact on things like getting a job. If you use your card for groceries, you use it enough, no worries. In 5 years it is nice to look back and see ""never paid late; mostly paid the entire amount each month; never went over limit; never went into collections"" and so on. In my experience you can tell they like you because they keep raising your limit without you asking them to. If you want to buy a $2500 item and your credit limit is $1500 you could prepay $1000 onto the credit card and then use it. Or you could tell the vendor you'd rather use your debit card. Or you could pay $1500 on the credit card and then rest with your debit card. Lots of options. In my experience once you get up to that kind of money they'd rather not use a credit card because of the merchant fees they pay."

negative: Whether your card will work, I believe, depends on the institution that issued it. You'll just have to try. What I can tell you, is that the process of using a debit card or credit card in the US is fairly straight forward. If your card has a chip, you'll 'insert' your card, chip end first, into the bottom slot of the reader, assuming the reader has one. This technology is still being distributed / accepted, so you may encounter some areas where they don't have this, or they have an insert or sign that says something along the lines of 'No chip reader / swipe instead'. If your card doesn't have a chip, which looks like the bottom end of a cellular phone's SIM card, you just swipe your card in the reader. There will / may be on-screen prompts, which will explain any additional input necessary from you. Depending on how they 'process' your card - As a debit card or credit card (They can 'process' a debit card as if it's a standard credit card), you may or may not be asked to enter your debit card's PIN. If they process it as debit, you'll have to enter your PIN. If they process it as if it were a credit card, it will still go through but you'll be asked to sign the receipt.  IMPORTANT FOR YOU TO NOTE: You need to find out whether your card issuer will charge you foreign transaction fees when you use your Indian debit card in the US.  Is the card carrying a different currency than the US?

negative: According to PayPal, if he or she used a credit or debit card, then yes.

negative: The post that you linked to saying that a pre-paid credit card is really a debit card is kind of right and kind of wrong.  From your point of view, to get a $1000 pre-paid credit card, you need to hand over $1000. So nobody is giving any credit to you. You can only spend money that you actually own, like a debit card.  For the merchant accepting your card, it is exactly like a credit card. He doesn't know what deals you had to make to get the card. The merchant just knows that up to some amount, he will receive money. So in that sense it is a credit card and will be accepted like a credit card.

negative: "First of all, this does not sound like a debit situation. Every debit has to be authorized by the entry of a pin code. So, the hotel could not have arbitrarily created a new debit charge. Usually, hotel charges are credit charges. Once they have your credit card number, they can charge anything they want to the credit card. If it is an accidental double charge, you can call the hotel and ask them to refund $100 or whatever the mistake was plus your overdraft fee. In all probability they will refund any double charge, but not agree to refund the fee. You can also contest the charge and do a ""chargeback"" of the amount which was double charged. You will probably not be able to collect the overdraft fee that you got from the hotel unless you sue them in small claims court, or you luck out and the hotel agrees to refund the fee as well."

negative: "In short you have to wait till the hold expires. If its one week, its great. Few years back it was one Month. It is advisable you use a Credit Card for these type of transactions. With Credit Cards you are not out of funds like in Debit Cards. Plus the reversals are as much as I know automatic. In case of Debit Cards, the Holds are not automatically released on cancelled transactions but released only after expiry. Where as in Credit Cards, the holds are released immediately on cancelled transactions. ""Does the hold reserve it for them or for the original transaction?"" Yes hold is for that specific transaction from that specific merchant. i.e. if you try and book the same item from the same merchant, you will not be able to as you have money blocked. Although the merchant sends an unblock message when cancelling, on Debit cards these messages are not supported in India"

negative: Generally, credit card networks (as opposed to debit/ATM cards that may or may not have Visa/MC logos) have a rule that a merchant must accept any credit card with their logo. Visa rules for merchants in the US say it explicitly: Accept all types of valid Visa cards. Although Visa card acceptance   rules may vary based on country specific requirements or local   regulations, to offer the broadest possible range of payment options   to cardholder customers, most merchants choose to accept all   categories of Visa debit, credit, and prepaid cards.* Unfortunately the Visa site for China is in Chinese, so I can't find similar reference there. You can complain against a merchant who you think had violated Visa rules here. That said, its not a law, its a contract between the merchant processor and the Visa International organization, and merchants are known to break these rules here and there (most commonly - refusing to accept foreign cards, including in the US). Also, local laws may affect these contracts (for example, in the US it is legal to set minimum amount requirements when accepting credit cards). This only affects credit card processing, and merchants that don't accept credit cards may still accept debit cards since those work in different networks, under a different set of rules. Those who accept credit cards, are also required to accept debit cards (at least if used as credit).

negative: Because even if you won the lottery, without at least some credit history you will have trouble renting cars and hotel rooms. I learned about the importance, and limitations of credit history when, in the 90's, I switched from using credit cards to doing everything with a debit card and checks purely for convenience. Eventually, my unused credit cards were not renewed. At that point in my life I had saved a lot and had high liquidity. I even bought new autos every 5 years with cash. Then, last decade, I found it increasingly hard to rent cars and sometimes even a hotel rooms with a debit card even though I would say they could precharge whatever they thought necessary to cover any expenses I might run. I started investigating why and found out that hotels and car rentals saw having a credit card as a proxy for low risk that you would damage the car or hotel room and not pay. So then I researched credit cards, credit reports, and how they worked. They have nothing about any savings, investments, or bank accounts you have. I had no idea this was the case. And, since I hadn't had cards or bought anything on credit in over 10 years there were no records in my credit files. Old, closed accounts had fallen off after 10 years. So, I opened a couple of secured credit cards with the highest security deposit allowed. They unsecured after a year or so. Then, I added several rewards cards. I use them instead of a debit card and always pay in full and they provide some cash back so I save money compared to just using a debit card. After 4 years my credit score has gone to 800+ even though I have never carried any debt and use the cards as if they were debit cards. I was very foolish to have stopped using credit cards 20 years ago but just had no idea of the importance of an established credit history. And note that establishing a great credit history does not require that you borrow money or take out loans for anything. just get credit cards and pay them in full each month.

negative: Unless a study accounts for whether the users are following a budget or not, it is irrelevant to those who are trying to take their personal finances seriously. I can certainly believe that those who have no budget will spend more on a credit card than they will on a debit card or with cash. Under the right circumstances spending with cards can actually be a tool to track and reduce spending. If you can see on a monthly and yearly basis where all of your money was spent, you have the information to make decisions about the small expenses that add up as well as the obvious large expenses.  Debit cards and credit cards offer the same advantage of giving you an electronic record of all of your transactions, but debit cards do not come with the same fraud protection that credit cards have, so I (and many people like me) prefer to use credit cards for security reasons alone. Cash back and other rewards points bolster the case for credit cards over debit cards. It is very possible to track all of your spending with cash, but it is also more work. The frustration of accounting for bad transcriptions and rechecking every transaction multiple times is worth discussing too (as a reason that people get discouraged and give up on budgeting). My point is simply that credit cards and the electronic records that they generate can greatly simplify the process of tracking your spending. I doubt any study out there accounts for the people who are specifically using those benefits and what effect it has on their spending.

negative: "Yes, merchants may charge a fee for using a credit card. For a credit card transaction, interchange fees flow from the merchant to the card issuer. This is why Australians are seeing a boom in ""Debit"" MasterCard/VISA cards - the issuing banks make income when you select ""Credit"".  These costs can be passed from the merchant to the customer as a ""Credit Card Fee"". For an EFTPOS transaction, the interchange flows the other way, from the card issuer to the acquiring bank (The merchant's bank).  As an aside, the setup of these fees is why some large supermarket chains in Australia restrict you from selecting ""Credit"" with a scheme debit card (MasterCard and VISA are 'schemes').  They are 'acquirers' in the payments networks and they make interchange fees when you hit ""Savings"" and pay if you hit ""Credit"" - therefore where you can hit either ""Credit"" or ""Savings"" they prefer (and may force) you to press ""Savings""."

negative: As other answers and comments suggest you are trying to do something... odd to say the least. No one wants to use a credit card to finance a checking/current account because you are creating a debt on that credit card (unless you are in the odd situation where the card is in credit) that will immediately start accruing interest at a rate probably in excess of 10% per annum. That is not a clever thing to do. What you really need to do is find an account that one of you owns that has a positive balance and use an internet banking service to transfer part of that positive balance onto the debit card. The other solution is not to use the debit card at all but use the credit card to complete the purchases you are trying to manage with the debit card. The reason that BofA and AmEx customer support can't help you is that no one would ever do what you want to do; they would either move existing money from another account or ask for a bank loan.

negative: There are several reasons why credit cards are popular in the US: On the other hand, debit cards do not have any of these going for them.  A debit card doesn't make much money for the bank unless you overdraw or something, so banks don't have incentive to push you to use them as much.  As a result they don't offer rewards other benefits. Some people say the ability to spend more than you have is a downside of a credit card.  But it's really an upside.  The behavior of doing that when it isn't needed is bad, but that's not the card's fault, it's the users'.  You can get a credit card with a very small limit if this is an issue for you. The question I find interesting is why debit cards are more popular in your home country.  I can't think of any advantage they offer besides free cash back.  But most people in the US don't use cash much either.  I have to think in your home country the banks have a different revenue model or perhaps your country isn't as eager to offer tons of easy credit to everyone as the US is.

negative: For the US government, they've just credited Person B with a Million USD and haven't gained anything (afterall, those digits are intangible and don't really have a value, IMO). Two flaws in this reasoning: The US government didn't do anything. The receiving bank credited the recipient. If the digits are intangible, such that they haven't gained anything, they haven't lost anything either. In practice, the role of governments in the transfer is purely supervisory. The sending bank debits the sender's account and the receiving bank credits the recipient's account. Every intermediary makes some money on this transaction because the cost to the sender exceeds the credit to the recipient. The sending bank typically receives a credit to their account at a correspondent bank. The receiving bank typically receives a debit from their account at a correspondent bank. If a bank sends lots of money, eventually its account at its correspondent will run dry. If a bank receives lots of money, eventually its account at its correspondent will have too much money. This is resolved with domestic payments, sometimes handled by governmental or quasi-governmental agencies. In the US, banks have an account with the federal reserve and adjust balances there. The international component is handled by the correspondent bank(s). They also internally will credit and debit. If they get an imbalance between two currencies they can't easily correct, they will have to sell one currency to buy the other. Fortunately, worldwide currency exchange is extremely efficient.

negative: "Until the CARD act, credit card rules required that merchants had no minimum purchase requirement to use a card. New rules permit a minimum but it must be clearly posted.  Update - Stores can now refuse small credit card charges is an excellent article which clarifies the rules. It appears that these rules apply to credit, not debit cards. So to be clear - the minimum do not apply to the OP as he referenced using a debit card.  ""Superiority""? Hm. I'd be a bit embarrassed to charge such small amounts. Although when cash in my wallet is very low, I may have little choice. Note, and disclaimer, I am 48, 30 years ago when I started using cards, there were no POS machines. Credit card transactions had a big device that got a card imprint and the merchant looked up to see if your card was stolen in a big book they got weekly/monthly. Times have changed, and debit cards may be faster, especially if with cash you give the cashier $5.37 for a $2.37 transaction, but the guy entered $5 already. This often takes a manager to clear up."

negative: I was hoping to comment on the original question, but it looks to me like the asker lives in the EU, where credit cards are a lot less common and a lot of the arguments (car rental, building up of credit etc) brought forward by people living in the US just don't apply.  In fact especially airlines (and other merchants) will charge you extra when using a credit card instead of a debit card and this can add up fairly quickly. I hold a credit card purely for travelling outside the EU and occasionally I will travel for work and make my own arrangements, then it can come in handy as I am able to reclaim my expenses before I have to pay my credit card bill (in this case I will also claim the extra credit card fees from my employer). This however is for my personal convenience and not strictly necessary. (I could fill out a bunch of paperwork and claim the costs from my employer as an advance.) In the EU I find that if my VISA debit card will not work in a shop, neither will my credit card, so on that note it's pretty pointless. So to answer the asker question: If you live (and travel) in the EU  you don't need a credit card, ever. If you travel to the US, it would be advantageous to get one. Occasionally banks will offer you a credit card for free and there's no harm in taking it (apart from the fact that you have one more card to keep track off), but if you do, set up a direct debit to pay it off automatically.  And as other people have said: Don't spend money you don't have. If you are not absolutely sure you can't do this, don't get a credit card.

negative: If it's always the same person: Open a second account, with them as the account holder. Get them a debit card for that account. To move money, do an inter-account transfer from yours to theirs. Fast, low to no fee, simple. (For a while I had a second credit card on my account for this purpose -- the other person was a trustworthy family member -- but a debit card on its own account is cleaner and much less risky.)

negative: Unfortunately not. Even if the credit card balance is positive (i.e. customer has overpaid the credit card account), you cannot withdraw cash (for free) - as any cash withdrawal is subject to 12.9% interest - even if repaid in full at the end of the month! The clarity credit card is one of the best cards for overseas spending, as its load free (no fees for purchases abroad) and it gives near perfect exchange rates. If your balance is positive, you start at £0, then fund that credit card account from your bank account £500. You can then spend on your credit card, and when your next bill is due at the end of the month - they will use that extra £500 sitting in your account first, and ask for the remainder from you. i.e.  scenario1:  scenario 2: It is better in my opinion, to set up a direct debit to always clear out the full amount on your credit card. That way, you have cash in your bank account for emergencies (getting £500 back from a credit card will take a few days to process as opposed to having the ability to withdraw cash from the cashpoint 24/7). And once the direct debit is paid automatically at the end of the month, there are no fees - voila your credit card is almost like a debit card, spend on it when you like, it gets paid automatically, no hassle, no worries. This approach does take a careful mindset though, as you need to know your credit limits and also you need to ensure your bank account has enough to pay off the direct debit at the end of the month. Otherwise those darn fees will get you (and hurt your credit rating). For cash spending, you will want to either take cash with you (check online here for best rates & get the money well in advance to avoid fees). Also in some countries the exchange rate is better there, than in the UK, google will help you here. If you dont like the idea of carrying large sums of cash with you can use a prepaid card like CaxtonFX, which is one of the better ones out there. The other well known ones are FairFX and Travelex Cash Passport.

negative: There is also security aspect. By reducing the number of active credit/debit cards, one significantly reduces the surface of attack. There is smaller chance of getting one of your card information stolen and misused (cf Target data leaks and others).

negative: A few reasons make sense: They have a defined process for rentals, risk assessment, and customer credit. Especially for a large corporation, making changes to that process is not trivial, adds risk/uncertainty, and will be costly. Such changes for a relatively small customer base might not makes sense. Many rental companies DO allow you to rent with a debit card. Why do some businesses take cash only?  With a debit card, there is no third party guarantee. With a credit card, the cash is coming from a well-established third party who will pay (assuming no disputes) and has a well-established history of paying. Even if the merchant holds your account, it is still your cash under the control of you and your bank until the deposit clears the merchants bank. It is not surprising they view that as more risk and potentially not worth hassling with debit.

negative: "Using cash instead of a debit card lets you see in real time how much cash you have left and where it's going.  It's a lot ""harder"" to see the cash disappear from your wallet than it is to swipe the plastic (whether it's a debit or credit card).  Using cash is a way to keep the funds in check and to keep spending within a budget (i.e. you can't spend it if you don't physically have the cash anymore)."

negative: It is absolutely worth it.  My wife and I have two of these accounts (different banks).  We are required to use our cards 20 times for one bank, and 15 for the other.  We have yet to miss the required transactions in a month (over 15 months of use now), and are actually considering getting a third account.  Between the two of us, we simply have to use our card on average once a day. Getting gas? Use your debit card. Getting stamps? Use your debit card? Self checkout? Use your debit card twice. Eating out? Use your debit card. If married, split the bill. As soon as we reach the minimum, we stop using the debit cards and switch to credit cards to further boost the rewards.  Maybe it's easier for us since we don't have kids and are out a lot, but 12 transactions is really simple to obtain.  We receive ~$100 a month from our two accounts, all for doing something we already do.

negative: "The ""hold"" is just placeholder that prevents you from overspending until the transaction is settled. The merchant isn't ""holding"" your money, your bank or card provider is protecting itself from you overdrawing. In general, it takes 1-3 days for a credit transaction to settle. With a credit card, this usually isn't an issue, unless you have a very low credit line or other unusual things going on. With pre-paid and debit cards, it is an issue, since your spending power is contingent upon you having an available balance. I'm a contrarian on this topic, but I don't see any compelling reason to use debit or stored value cards, other than preventing yourself from overspending. I've answered a few other questions in detail in this area, if you're interested."

negative: If *everyone* earned enough credits during the summer so they don't have to pay for their energy use in the winter then who is paying the people to produce the energy in the winter?  It's mathematically impossible for net metering (crediting people at the same rate they are debited for each unit of energy) to work when everyone is on it.  That's why a reduced credit (the same rate wholesale energy producers receive for their energy) is inevitable.

negative: There's still a paper trail for every transaction. There's gotta be a debit and credit in there somewhere. Plus these companies are supposed to be audited by an *independent* auditor who, if they're worth their salt, should be able to track down every penny.


query: When should you use an actively managed mutual fund in a 401k?

positive: "For US stocks it's a bit of a gamble. Many actively managed funds underperform the market indexes, but some of them outperform in many years. With an index you will get average results. With an active manager you ""might"" do better than average. So you can view active management as a higher risk, potentially higher reward investment approach. On the other hand, if you want to diversify some of your investments into international stocks, bonds, junk bonds, and real estate (REITs) active management is highly likely to be better than indexing. For these specialized areas specialized knowledge and research is needed."

positive: By definition, actively managed funds will underperform passive index funds as a whole. Or more specifically: The aggregate performance of all actively managed portfolio of publicly-tradable assets will have equal performance to those of passively managed portfolios. Which taken with premise two: Actively managed funds will charge higher fees than passively managed funds Results in: In general, lower-fee investment vehicles (e.g. passive index investments) with broad enough diversification to the desired risk exposure will outperform higher-fee options But don't take my wonkish approach, from a more practical perspective consider:

negative: "I hope a wall of text with citations qualifies as ""relatively easy."" Many of these studies are worth quoting at length. Long story short, a great deal of research has found that actively-managed funds underperform market indexes and passively-managed funds because of their high turnover and higher fees, among other factors.  Longer answer: Chris is right in stating that survivorship bias presents a problem for such research; however, there are several academic papers that address the survivorship problem, as well as the wider subject of active vs. passive performance. I'll try to provide a brief summary of some of the relevant literature.  The seminal paper that started the debate is Michael Jensen's 1968 paper titled ""The Performance of Mutual Funds in the Period 1945-1964"". This is the paper where Jensen's alpha, the ubiquitous measure of the performance of mutual fund managers, was first defined. Using a dataset of 115 mutual fund managers, Jensen finds that The evidence on mutual fund performance indicates not only that these 115 mutual funds were on average not able to predict security prices well enough to outperform a buy-the-market-and-hold policy, but also that there is very little evidence that any individual fund was able to do significantly better than that which we expected from mere random chance. Although this paper doesn't address problems of survivorship, it's notable because, among other points, it found that managers who actively picked stocks performed worse even when fund expenses were ignored. Since actively-managed funds tend to have higher expenses than passive funds, the actual picture looks even worse for actively managed funds. A more recent paper on the subject, which draws similar conclusions, is Martin Gruber's 1996 paper ""Another puzzle: The growth in actively managed mutual funds"". Gruber calls it ""a puzzle"" that investors still invest in actively-managed funds, given that their performance on average has been inferior to that of index funds. He addresses survivorship bias by tracking funds across the entire sample, including through mergers. Since most mutual funds that disappear are merged into existing funds, he assumes that investors in a fund that disappear choose to continue investing their money in the fund that resulted from the merger. Using this assumption and standard measures of mutual fund performance, Gruber finds that mutual funds underperform an appropriately weighted average of the indices by about 65 basis points per year. Expense ratios for my sample averaged 113 basis points a year. These numbers suggest that active management adds value, but that mutual funds charge the investor more than the value added. Another nice paper is Mark Carhart's 1997 paper ""On persistence in mutual fund performance"" uses a sample free of survivorship bias because it includes ""all known equity funds over this period."" It's worth quoting parts of this paper in full: I demonstrate that expenses have at least a one-for-one negative impact on fund performance, and that turnover also negatively impacts performance. ... Trading reduces performance by approximately 0.95% of the trade's market value.  In reference to expense ratios and other fees, Carhart finds that The investment costs of expense ratios, transaction costs, and load fees all have a direct, negative impact on performance. The study also finds that funds with abnormally high returns last year usually have higher-than-expected returns next year, but not in the following years, because of momentum effects. Lest you think the news is all bad, Russ Wermer's 2000 study ""Mutual fund performance: An empirical decomposition into stock‐picking talent, style, transactions costs, and expenses"" provides an interesting result. He finds that many actively-managed mutual funds hold stocks that outperform the market, even though the net return of the funds themselves underperforms passive funds and the market itself.  On a net-return level, the funds underperform broad market indexes by one percent a year. Of the 2.3% difference between the returns on stock holdings and the net returns of the funds, 0.7% per year is due to the lower average returns of the nonstock holdings of the funds during the period (relative to stocks). The remaining 1.6% per year is split almost evenly between the expense ratios and the transaction costs of the funds. The final paper I'll cite is a 2008 paper by Fama and French (of the Fama-French model covered in business schools) titled, appropriately, ""Mutual Fund Performance"". The paper is pretty technical, and somewhat above my level at this time of night, but the authors state one of their conclusions bluntly quite early on: After costs (that is, in terms of net returns to investors) active investment is a negative sum game.  Emphasis mine. In short, expense ratios, transaction costs, and other fees quickly diminish the returns to active investment. They find that The [value-weight] portfolio of mutual funds that invest primarily in U.S. equities is close to the market portfolio, and estimated before fees and expenses, its alpha is close to zero. Since the [value-weight] portfolio of funds produces an α close to zero in gross returns, the alpha estimated on the net returns to investors is negative by about the amount of fees and expenses. This implies that the higher the fees, the farther alpha decreases below zero. Since actively-managed mutual funds tend to have higher expense ratios than passively-managed index funds, it's safe to say that their net return to the investor is worse than a market index itself. I don't know of any free datasets that would allow you to research this, but one highly-regarded commercial dataset is the CRSP Survivor-Bias-Free US Mutual Fund Database from the Center for Research in Security Prices at the University of Chicago. In financial research, CRSP is one of the ""gold standards"" for historical market data, so if you can access that data (perhaps for a firm or academic institution, if you're affiliated with one that has access), it's one way you could run some numbers yourself."

negative: "What does ETFs have to do with this or Amazon?   Actually, investing in ETFs means you are killing actively managed Mutual Funds (managed by people, fund managers) to get an average return (and loss) of the market that a computer manage instead of a person. And the ETF will surely have Amazon stocks because they are part of the index.  I only invest in actively managed mutual funds. Yes, most actively managed mutual funds can't do better than the index, but if you work a bit harder, you can find the many that do much better than the ""average"" that an index give you."

negative: "As you alluded to in your question, there is not one answer that will be true for all mutual funds.  In fact, I would argue the question is not specific to mutual funds but can be applied to almost anyone who must make an investment decision: a mutual fund manager, hedge fund manager, or an individual investor. Even though money going into a company 401(k) retirement savings plan is typically automatically allocated to different funds as we have specified, this is generally not the case for other investment accounts. For example, I also have a Roth IRA in which I have some money from each paycheck direct deposited and it's up to me to decide whether to leave that money in cash or to invest it somewhere else.  Every time you invest more money into a mutual fund, the fund manager has the same decision to make. There are two commonly used mutual fund figures that relate to your question: turnover rate, and cash reserves. Turnover rate measures the percent of a fund's portfolio that changes every year.  For example, a turnover rate of 100% indicates that a fund replaces every asset it held at the beginning of the year with something else at the end of the year – funds with turnover rates greater than 100% average a holding period for a given asset of less than one year, and funds with turnover rates less than 100% average a holding period for a given asset of more than one year. Cash reserves simply measure the amount of money funds choose to keep as cash instead of investing in other assets. Another important distinction to make is between actively managed funds and passively managed funds. Passively managed funds are often referred to as ""index funds"" and have as their goal only to match the returns of a given index or some other benchmark.  Actively managed funds on the other hand try to beat the market by exploiting so-called market inefficiencies; e.g. buying undervalued assets, selling overvalued assets, ""timing"" the market, etc. To answer your question for a specific fund, I would encourage you to look at the fund's prospectus. I take as one example of a passively managed fund the Vanguard 500 Index Fund (VFINX), a mutual fund that was created to track the S&P 500.  In its prospectus, the fund states that, ""to track its target index as closely as possible, the Fund attempts to remain fully invested in stocks"". Furthermore, the prospectus states that ""the fund's daily cash balance may be invested in one or more Vanguard CMT Funds, which are very low-cost money market funds.""  Therefore, we would expect both this fund's turnover rate and cash reserves to be extremely low. When we look at its portfolio composition, we see this is true – it is currently at a 4.8% turnover rate and holds 0.0% in short term reserves.  Therefore, we can assume this fund is regularly purchasing shares (similar to a dollar cost averaging strategy) instead of holding on to cash and purchasing shares together at a specific time. For actively managed funds, the picture will tend to look a little different.  For example, if we look at the Magellan Fund's portfolio composition, we can see it has a turnover rate of 42%, and holds around .95% in cash/short term reserves.  In this case, we can safely guess that trading activity may not be as regular as a passively managed fund, as an active manager attempts to time the market.  You may find mutual funds that have much higher cash reserves – perhaps 10% or even more. Granted, it is impossible to know the exact trading strategy of a mutual fund, and for good reason – if we knew for example, that a fund purchases shares every day at 2:30PM in order to realign with the S&P 500, then sellers of S&P components could up the prices at that time to exploit the mutual fund's trade strategy.  Large traders are constantly trying to find ways to conceal their actual trading activity in order to avoid these exact problems. Finally, I feel obligated to note that it is important to keep in mind that trade frequency is linked to transactions costs – in general, the more frequently an investment manager (whether it be you or a mutual fund manager) executes trades, the more that manager will lose in transactions costs."

negative: Let's say that you want to invest in the stock market.  Choosing and investing in only one stock is risky.  You can lower your risk by diversifying, or investing in lots of different stocks.  However, you have some problems with this:  When you buy stocks directly, you have to buy whole shares, and you don't have enough money to buy even one whole share of all the stocks you want to invest in. You aren't even sure which stocks you should buy. A mutual fund solves both of these problems.  You get together with other investors and pool your money together to buy a group of stocks.  That way, your investment is diversified in lots of different stocks without having to have enough money to buy whole shares of each one.  And the mutual fund has a manager that chooses which stocks the fund will invest in, so you don't have to pick. There are lots of mutual funds to choose from, with as many different objectives as you can imagine.  Some invest in large companies, others small; some invest in a certain sector of companies (utilities or health care, for example), some invest in stocks that pay a dividend, others are focused on growth.  Some funds don't invest in stocks at all; they might invest in bonds, real estate, or precious metals.  Some funds are actively managed, where the manager actively buys and sells different stocks in the fund continuously (and takes a fee for his services), and others simply invest in a list of stocks and rarely buy or sell (these are called index funds). To answer your question, yes, the JPMorgan Emerging Markets Equity Fund is a mutual fund.  It is an actively-managed stock mutual fund that attempts to invest in growing companies that do business in countries with rapidly developing economies.

negative: There are several things being mixed up in the questions being asked. The expense ratio charged by the mutual fund is built into the NAV per share of the fund, and you do not see the charge explicitly  mentioned as a deduction  on your 401k statement (or in the statement received from the mutual fund in a non-401k situation). The expense ratio is listed in the fund's prospectus, and should also have been made available to you in the literature about the new 401k plan that your employer is setting up. Mutual fund fees (for things like having a small balance, or for that matter, sales charges if any of the funds in the 401k are load funds, God forbid) are different. Some load mutual funds waive  the sales charge load for 401k participants, while some may not. Actually, it all depends on how hard the employer negotiates with the 401k administration company who handles all the paperwork and the mutual fund company with which the 401k administration company negotiates.  (In the 1980s, Fidelity Magellan (3% sales load) was a hot fund, but my employer managed to get it as an option in our plan with no sales load: it helped that my employer was large and could twist arms more easily than a mom-and-pop outfit or Solo 401k plan could). A long long time ago in a galaxy far far away, my first ever IRA contribution of $2000 into a  no-load mutual fund resulted in a $25 annual maintenance fee, but the law allowed the payment of this fee separately from the $2000 if the IRA owner wished to do so. (If not, the $25 would reduce the IRA balance (and no, this did  not count as a premature distribution from the IRA). Plan expenses are what the 401k administration company charges the employer for running the plan (and these expenses are not necessarily peanuts; a 401k plan is not something that needs just a spreadsheet -- there is lots of other paperwork that the employee never gets to see). In some cases, the employer pays the entire expense as a cost of doing business; in other cases, part is paid by the employer and the rest is passed on to the employees.  As far as I know, there is no mechanism for the employee to pay these expenses outside the 401k plan (that is, these expenses are (visibly) deducted from the 401k plan balance). Finally, with regard to the question asked: how are plan fees divided among the investment options? I don't believe that anyone other than the 401k plan administrator or the employer can answer this. Even if the employer simply adopts one of the pre-packaged plans offered by a big 401k administrator (many brokerages and mutual fund companies offer these), the exact numbers depend on which pre-packaged plan has been chosen. (I do think the answers the OP has received are rubbish).

negative: This might be better suited to r/personalfinance but if you're looking to invest I'd say start with an index fund. The MER's (fees) for most other mutual funds take too heavy a chunk of returns to be worth it in a market where actively managed funds are either underperforming of performing at par with passive funds.   Additionally if these are your first investments, make sure you're doing it with investment goals in mind. Is this money you're saving for short, medium, or long term? For medium and long term investing make sure you're doing it through a tax efficient instrument like an IRA or 401k.

negative: Most people carry a diversity of stock, bond, and commodities in their portfolio.  The ratio and types of these investments should be based on your goals and risk tolerance.  I personally choose to manage mine through mutual funds which combine the three, but ETFs are also becoming popular. As for where you keep your portfolio, it depends on what you're investing for.  If you're investing for retirement you are definitely best to keep as much of your investment as possible in 401k or IRAs (preferably Roth IRAs).  Many advisers suggest contributing as much to your 401k as your company matches, then the rest to IRA, and if you over contribute for the IRA back to the 401k.  You may choose to skip the 401k if you are not comfortable with the choices your company offers in it (such as only investing in company stock). If you are investing for a point closer than retirement and you still want the risk (and reward potential) of stock I would suggest investing in low tax mutual funds, or eating the tax and investing in regular mutual funds.  If you are going to take money out before retirement the penalties of a 401k or IRA make it not worth doing. Technically a savings account isn't investing, but rather a place to store money.

negative: "So many complicated answers for a straight forward question. First to this point ""I am failing to see why would a person get an IRA, instead of just putting the same amount of money into a mutual fund..."" An IRA can be invested in a mutual fund.  The IRA benefit over standard mutual fund is pre-tax contribution lowering your current tax liability. The advantage of an IRA over a 401k is control.  Your employer controls where the 401k is invested, you control where your IRA is invested.  Often employers have a very small number of options, because this keeps their costs with the brokerage low. 401k is AMAZING if you have employer matched contributions.  Use them to the maximum your employer will match.  After that OWN your IRA.  Control is key when it comes to your money. On IRA's. Buy ROTH first.  Contribute the calendar maximum.  Then get a traditional.  The benefit of ROTH is that you already paid taxes on the contribution so your withdrawal is not taxed AND they do not tax the interest earned like they do on a standard mutual fund."

negative: I would say that the three most important skills are: Note that some costs are hidden. So, for example, a mutual fund investing in other countries than where you live in may mean the investment target country charges a certain percentage of dividends going to the mutual fund. The mutual fund company doesn't usually want to tell you this. There may be clever financial instruments (derivatives) that can be used to avoid this, but they are not without their problems. If you diversify into equities at low cost, you will have a very wealthy future. I would recommend you to compare two options: ...and pick from these options the cheaper one. If your time has a high value, and you wish to take this value into account, I would say it is almost always far better option to choose an index fund. Whatever you do, don't pay for active management! It is a mathematical truth that before costs, actively managed investments will yield the same return than indexed investments. However, the costs are higher in active management, so you will have less total return. Don't believe that good historical return would imply good future return. However, if for some reason you see an index fund that continuously loses to the index more than by the amount of stated costs, beware!

negative: "Your employer sends the money that you choose to contribute, plus employer match if any, to the administrator of the 401k plan who invests the money as you have directed, choosing between the alternatives offered by the administrator. Typically, the alternatives are several different mutual funds with different investment styles, e.g. a S&P 500 index fund, a bond fund, a money-market fund, etc.  Now, a statement such as ""I see my 401k is up 10%"" is meaningless unless you  tell us how you are making the comparison. For example, if you have just started employment and $200 goes into your 401k each month and is invested in a money-market fund (these are paying close to 0% interest  these days), then your 11th contribution increases your  401k from $2000 to $2200 and your 401k is ""up 10%"". More generally, suppose for simplicity that all the  401k investment is in just one (stock) mutual fund and that you own 100 shares of the fund as of right now.  Suppose also that your next contribution will not occur for three weeks when you get your next paycheck, at which time additional shares of the mutual fund will be purchased Now, the value of the mutual fund shares (often referred to as net asset value or NAV) fluctuates as stock prices rise and fall, and so the  401k balance = number of shares times NAV changes in accordance with these fluctuations. So,  if the NAV increases by 10% in the next two weeks, your 401k balance will have increased by 10%.  But you still own only 100 shares of the mutual fund. You cannot use the 10% increase  in value to buy more shares in the mutual fund  because there is no money to pay for the additional shares  you wish to purchase.  Notice that there is no point selling some of the shares (at the 10% higher NAV) to get cash  because you will be purchasing shares at the higher NAV too. You could, of course, sell shares of the stock mutual fund at the higher NAV and buy shares of some other fund available to you in the 401k plan.  One advantage of doing this inside the 401k plan is that you don't have to pay taxes (now) on the 10% gain that you have made on the sale. Outside tax-deferred plans such as 401k and IRA plans, such gains would be taxable in the year of the sale.  But note that selling the shares of the stock fund and buying something else indicates that you believe that the NAV of your stock mutual fund is unlikely to increase any further in the near future. A third possibility for your 401k being up by 10% is that the mutual fund paid a dividend or made a capital gains distribution in the two week period that we are discussing.  The NAV falls when such events occur, but if you have chosen to reinvest the dividends and capital gains, then the number of shares that you own goes up.  With the same example as before, the NAV goes up 10% in two weeks at which time a capital gains distribution occurs, and so the NAV falls back to where it was before.  So, before the capital gains distribution, you owned 100 shares at $10 NAV which went up to $11 NAV (10% increase in NAV) for a net increase in 401k balance from $1000 to $1100. The mutual fund distributes capital gains in the amount of $1 per share sending the NAV back to $10, but you take the $100 distribution and plow it back into the mutual fund, purchasing 10 shares at the new $10 NAV.  So now you own 110 shares at $10 NAV (no net change in price in two weeks) but your 401k balance is $1100, same as it was before the capital gains distribution and you are up 10%.  Or, you could have chosen to invest the distributions into, say, a bond fund available in your 401k plan and still be up 10%, with no change in your stock fund holding, but a new investment of $100 in a  bond fund. So, being up 10% can mean different things and does not necessarily mean that the ""return"" can be used to buy more shares."

negative: Mutual Funds are relatively evaluated and this is likely what you want.  Your answer is likely the information ratio.  If your interested, Active Portfolio Management by Grinold, Kahn is probably a good book to read.  That  being said, hedge funds will generally have absolute mandates and will be more likely to use a sharpe ratio.

negative: "Open an investment account on your own and have them roll the old 401K accounts into either a ROTH or traditional IRA. Do not leave them in old 401k accounts and definitely don't roll them into your new employer's 401K. Why? Well, as great as 401K accounts are, there is one thing that employers rarely mention and the 401K companies actively try to hide:    Most 401K plans are loaded with HUGE fees. You won't see them on your statements, they are often hidden very cleverly with accounting tricks. For example, in several plans I have participated in, the mutual fund symbols may LOOK like the ones you see on the stock tickers, but if you read the fine print they only ""approximate"" the underlying mutual fund they are named for. That is, if you multiply the number of shares by the market price you will arrive at a number higher than the one printed on your statement.  The ""spread"" between those numbers is the fee charged by the 401K management company, and since employees don't pick that company and can't easily fire them, they aren't very competitive unless your company is really large and has a tough negotiator in HR. If you work for a small company, you are probably getting slammed by these fees. Also, they often charge fees for the ""automatic rebalancing"" service they offer to do annually to your account to keep your allocation in line with your current contribution allocations.  I have no idea why it is legal for them not to disclose these fees on the statements, but they don't. I had to do some serious digging to find this out on my own and when I did it was downright scary. In one case they were siphoning off over 3% annually from the account using this standard practice. HOWEVER, that is not to say that you shouldn't participate in these plans, especially if there is an employer match. There are fees with any investment account and the ""free money"" your employer is kicking in almost always offsets these fees. My point here is just that you shouldn't keep the money in the 401K after you leave the company when you have an option to move it to an account with much cheaper fees."

negative: I would not advise any stock-picking or other active management (even using mutual funds that are actively managed).  There is a large body of knowledge that needs learning before you even attempt that. Stay passive with index funds (either ETFs or (even better) low-cost passive mutual funds (because these prevent you from buying/selling). But I have not problem saying you can invest 100% in equity as long as your stomach can handle the price swings.  If you freek out after a 25% drop that does not recover within a year, so you sell at the market bottom, then you are better off staying with a lot less risk.  It is personal. There are a lot of valid reasons for young people to accept more risk - and equally valid reason why not.  See list at http://www.retailinvestor.org/saving.html#norisk

negative: "According to what little information is available currently, this fund is most akin to an actively managed exchange traded fund rather than an investment trust. An investment trust is an actively managed, closed-end fund that is tradeable on the stock market.  ""Closed-end"" means that there are a fixed number of shares available for trading, so if you wish to buy or sell shares in a closed-end fund you need to find someone willing to sell or buy shares.  ""Actively managed"" means that the assets are selected by the fund managers in the belief that they will perform well.  This is in contrast to a ""passively managed"" fund which simply tracks an underlying index.   The closed-end nature of investment trusts means that the share price is not well correlated to the value of the underlying assets.  Indeed, almost all UK investment trusts trade at a significant discount to their net asset value.  This reflects their historic poor performance and relatively weak liquidity.  Of course there are some exceptions to this. Examples of open-end funds are unit trust (US = mutual funds) and ETFs (exchange traded funds).  They are ""open-end"" funds in the sense that the number of shares/units available will change according to demand.  Most importantly, the price of a share/unit will be strongly correlated to the net asset value of the underlying portfolio.  In general, for an open-end fund, if the net asset value of the fund is X and there are Y shares/units outstanding, then the price of a share/unit will be X/Y.  Historic data shows that passively managed funds (index trackers) ""always"" outperform actively managed funds in the long term.  One of the big issues with actively managed funds is they have relatively high management fees.  The Peoples Trust will be charging about 1% with a promise that this should come down over time.  Compare this to a fee of 0.05% on a large, major market index tracking ETF.  Further, the 1% headline fee being touted by Peoples Trust is a somewhat misleading, since they are paying their employees bonuses with shares in the fund.  This will cause dilution of the net asset value per share and can be read as addition management fees by proxy.  Since competent fund managers will demand high incomes, bonus shares could easily double the management fees, depending on the size of the fund. In summary, history has shown that the promises of active fund managers rarely (if ever) come to fruition. Personally, I would not consider this to be an attractive investment and would look more towards a passively managed major market index ETF with low management fees."

negative: "An Exchange-Traded Fund (ETF) is a special type of mutual fund that is traded on the stock exchange like a stock.  To invest, you buy it through a stock broker, just as you would if you were buying an individual stock. When looking at a mutual fund based in the U.S., the easiest way to tell whether or not it is an ETF is by looking at the ticker symbol.  Traditional mutual funds have ticker symbols that end in ""X"", and ETFs have ticker symbols that do not end in ""X"".   The JPMorgan Emerging Markets Equity Fund, with ticker symbol JFAMX, is a traditional mutual fund, not an ETF.  JPMorgan does have ETFs; the JPMorgan Diversified Return Emerging Markets Equity ETF, with ticker symbol JPEM, is an example.  This ETF invests in similar stocks as JFAMX; however, because it is an index-based fund instead of an actively managed fund, it has lower fees. If you aren't sure about the ticker symbol, the advertising/prospectus of any ETF should clearly state that it is an ETF.  (In the example of JPEM above, they put ""ETF"" right in the fund name.)  If you don't see ETF mentioned, it is most likely a traditional mutual fund. Another way to tell is by looking at the ""investment minimums"" of the fund.  JFAMX has a minimum initial investment of $1000.  ETFs, however, do not have an investment minimum listed; because it is traded like a stock, you simply buy whole shares at whatever the current share price is.  So if you look at the ""Fees and Investment Minimums"" section of the JPEM page, you'll see the fees listed, but not any investment minimums."

negative: Your idea is a good one, but, as usual, the devil is in the details, and implementation might not be as easy as you think.  The comments on the question have pointed out your Steps 2 and 4 are  not necessarily the best way of doing things, and that perhaps  keeping the principal  amount invested in the same fund instead of taking it all out and re-investing it in a similar, but different, fund might be better. The other points for you to consider are as follows. How do you identify which of the thousands of conventional mutual  funds and ETFs is the average-risk / high-gain mutual fund into which you will place your initial investment?  Broadly speaking, most actively managed mutual fund with average risk are likely to give you  less-than-average gains over long periods of time.  The  unfortunate truth, to which many pay only Lipper service, is that  X% of actively managed mutual funds  in a specific category failed  to beat the average gain of all funds in that category, or the  corresponding index, e.g. S&P 500 Index for large-stock mutual funds, over the past N years, where X is generally between 70 and  100, and N is 5, 10, 15 etc.  Indeed, one of the arguments in  favor of investing in a very low-cost index fund is that you are effectively guaranteed the average gain (or loss :-(, don't forget the possibility of loss). This, of course, is also the argument used against investing in index funds.  Why invest in boring index funds and settle for average gains (at essentially no risk of not getting the average performance: average performance is close to guaranteed) when you can  get much more out of your investments by investing in a fund that is among the (100-X)% funds that had better than average returns?  The difficulty is that which funds are X-rated and which non-X-rated (i.e. rated G = good or PG = pretty good), is known only in hindsight whereas what you need is foresight. As everyone will tell you, past performance does not guarantee future results.  As someone (John Bogle?) said,  when you invest in a mutual fund, you are in the position of a rower in rowboat: you can see where you have been but not where you are going.  In summary, implementation of your strategy needs a good crystal ball to look into the future. There is no such things as a guaranteed bond fund. They also have risks though not necessarily the same as in a stock mutual fund. You need to have a Plan B in mind in case your chosen mutual fund takes a longer time than expected to return the 10% gain that you want to use to trigger profit-taking and investment of the gain into a low-risk bond fund, and also maybe a Plan C in case the vagaries of the market cause your chosen mutual fund to have negative return for some time. What is the exit strategy?

negative: One reason it matters whether or not you're beating the S&P 500 (or the Wilshire 5000, or whatever benchmark you choose to use) is to determine whether or not you'd be better off investing in an index fund (or some other investment vehicle) instead of pursuing whatever your current investment strategy happens to be.  Even if your investment strategy makes money, earning what the S&P 500 has averaged over multiple decades (around 10%) with an index fund means a lot more money than a 5% return with an actively managed portfolio (especially when you consider factors like compound interest and inflation). I use the S&P 500 as one of my criteria for judging how well (or poorly) my financial adviser is doing for me. If his recommendations (or trading activity on my behalf, if authorized) are inferior to the S&P 500, for too long, then I have a basis to discontinue the relationship. Check out this Wikipedia entry on stock market indices. There are legitimate criticisms, but on the whole I think they are useful. As an aside, the reason I point to index funds specifically is that they are the one of the lowest-cost, fire-and-forget investment strategies around.  If you compare the return of the S&P 500 index over multiple decades with most actively managed mutual funds, the S&P 500 index comes out ahead.

negative: Bond ETFs are just another way to buy a bond mutual fund.  An ETF lets you trade mutual fund shares the way you trade stocks, in small share-size increments.  The content of this answer applies equally to both stock and bond funds. If you are intending to buy and hold these securities, your main concerns should be purchase fees and expense ratios.  Different brokerages will charge you different amounts to purchase these securities.  Some brokerages have their own mutual funds for which they charge no trading fees, but they charge trading fees for ETFs.  Brokerage A will let you buy Brokerage A's mutual funds for no trading fee but will charge a fee if you purchase Brokerage B's mutual fund in your Brokerage A account. Some brokerages have multiple classes of the same mutual fund.  For example, Vanguard for many of its mutual funds has an Investor class (minimum $3,000 initial investment), Admiral class (minimum $10,000 initial investment), and an ETF (share price as initial investment).  Investor class has the highest expense ratio (ER).  Admiral class and the ETF generally have much lower ER, usually the same number.  For example, Vanguard's Total Bond Market Index mutual fund has Investor class (symbol VBMFX) with 0.16% ER, Admiral (symbol VBTLX) with 0.06% ER, and ETF (symbol BND) with 0.06% ER (same as Admiral).  See Vanguard ETF/mutual fund comparison page.  Note that you can initially buy Investor class shares with Vanguard and Vanguard will automatically convert them to the lower-ER Admiral class shares when your investment has grown to the Admiral threshold. Choosing your broker and your funds may end up being more important than choosing the form of mutual fund versus ETF.  Some brokers charge very high purchase/redemption fees for mutual funds.  Many brokers have no ETFs that they will trade for free.  Between funds, index funds are passively managed and are just designed to track a certain index; they have lower ERs.  Actively managed funds are run by managers who try to beat the market; they have higher ERs and tend to actually fall below the performance of index funds, a double whammy. See also Vanguard's explanation of mutual funds vs. ETFs at Vanguard. See also Investopedia's explanation of mutual funds vs. ETFs in general.

negative: What is my best bet with the 401K? I know very little about retirement plans and don't plan to ever touch this money until I retire but could this money be of better use somewhere else?  You can roll over a 401k into an IRA. This lets you invest in other funds and stocks that were not available with your 401k plan. Fidelity and Vanguard are 2 huge companies that offer a number of investment opportunities. When I left an employer that had the 401k plan with Fidelity, I was able to rollover the investments and leave them in the existing mutual funds (several of the funds have been closed to new investors for years). Usually, when leaving an employer, I have the funds transferred directly to the place my IRA is at - this avoids tax penalties and potential pitfalls.   The student loans.... pay them off in one shot?  If the interest is higher than you could earn in a savings account, then it is smarter to pay them off at once. My student loans are 1.8%, so I can earn more money in my mutual funds. I'm suspicious and think something hinky is going to happen with the fiscal cliff negotiations, so I'm going to be paying off my student loans in early 2013.  Disclaimer: I have IRA accounts with both Fidelity and Vanguard. My current 401k plan is with Vanguard.

negative: Yes you can rollover as many different 401ks into a single IRA account.  I have done it personally and it really cuts down on the overhead of keeping up with lots of different accounts.  Your brokerage or mutual fund company should be able to help you with it.  If you are using a company that just gives you forms and those forms don't mention an easy way to combine.  Then I suggest rolling over one 401k first then once that's finished you can rollover the other 401k into that same account.

negative: ETFs offer the flexibility of stocks while retaining many of the benefits of mutual funds. Since an ETF is an actual fund, it has the diversification of its potentially many underlying securities. You can find ETFs with stocks at various market caps and style categories. You can have bond or mixed ETFs. You can even get ETFs with equal or fundamental weighting. In short, all the variety benefits of mutual funds. ETFs are typically much less expensive than mutual funds both in terms of management fees (expense ratio) and taxable gains. Most of them are not actively managed; instead they follow an index and therefore have a low turnover. A mutual fund may actively trade and, if not balanced with a loss, will generate capital gains that you pay taxes on. An ETF will produce gains only when shifting to keep inline with the index or you yourself sell. As a reminder: while expense ratio always matters, capital gains and dividends don't matter if the ETF or mutual fund is in a tax-advantaged account. ETFs have no load fees. Instead, because you trade it like a stock, you will pay a commission. Commissions are straight, up-front and perfectly clear. Much easier to understand than the various ways funds might charge you. There are no account minimums to entry with ETFs, but you will need to buy complete shares. Only a few places allow partial shares. It is generally harder to dollar-cost average into an ETF with regular automated investments. Also, like trading stocks, you can do those fancy things like selling short, buying on margin, options, etc. And you can pay attention to the price fluctuations throughout the day if you really want to. Things to make you pause: if you buy (no-load) mutual funds through the parent company, you'll get them at no commission. Many brokerages have No Transaction Fee (NTF) agreements with companies so that you can buy many funds for free. Still look out for that expense ratio though (which is probably paying for that NTF advantage). As sort of a middle ground: index funds can have very low expense ratios, track the same index as an ETF, can be tax-efficient or tax-managed, free to purchase, easy to dollar-cost average and easier to automate/understand. Further reading:

negative: "First, consider what causes taxes to apply to a mutual fund, index or actively managed.  Dividends and capital gains are generally what will be distributed to shareholders given the nature of a mutual fund since the fund itself doesn't pay taxes.  For funds held in IRAs or other tax-advantaged accounts, this isn't a concern and thus people may not have this concern for those situations which can account for a lot of investing situations as people may have 401(k)s and IRAs that hold their investments rather than taxable accounts. Second, there can be tax-managed funds so there can be cases where a fund is managed with taxes in mind that is worth noting here as what is referenced is a ""Dummies"" link that is making a generalization.  For taxable accounts, it may make more sense to have a tax-managed fund rather than an index fund though I'd also argue to be careful of asset allocation as to maintain a purity of style can require selling of stocks that grow too big and thus trigger capital gains,e.g. small-cap and mid-cap funds that can't hold onto the winners as they would become mid-cap and large-cap instead of representing the proper asset class. A FUND THAT PLAYED IT SAFE--AND WAS SORRY would be a Businessweek story from 1998 of an actively managed fund that went mostly to cash and missed the rise of the stock market at that time if you want a specific example of what an actively managed fund can do that an index fund often cannot do.  The index fund is to track the index and stay nearly all invested all the time."

negative: "Unfortunately, I missed most of segment and I didn't get to understand the Why? To begin with, Cramer is an entertainer and his business is pushing stocks. If you put money into mutual funds (which most 401k plans limit your investments to), then you are not purchasing his product. Also, many 401k plans have limited selections of funds, and many of those funds are not good performers. While his stock-picking track record is much better than mine, his isn't that great.  He does point out that there are a lot of fees (mostly hidden) in 401k accounts. If you read your company's 5500 filing (especialy Schedule A), you can determine just how much your plan administrators are paying themselves. If paying excessive fees is your concern, then you should be rolling over your 401k into your IRA when you quit (or the employer-match vests, which ever is later).  Finally, Cramer thinks that most of his audience will max out their IRA contributions and have only a little bit left for their 401k. I'm most definately ""not most people"" as I'm maxing out both my 401k and IRA contributions."

negative: "Instead of using the actual index, use a mutual fund as a proxy for the index. Mutual funds will include dividend income, and usually report data on the value of a ""hypothetical $10,000 investment"" over the life of the fund. If you take those dollar values and normalize them, you should get what you want. There are so many different factors that feed into general trends that it will be difficult to draw conclusions from this sort of data. Things like news flow, earnings reporting periods, business cycles, geopolitical activity, etc all affect the various sectors of the economy differently."

negative: That is such a vague statement, I highly recommend disregarding it entirely, as it is impossible to know what they meant. Their goal is to convince you that index funds are the way to go, but depending on what they consider an 'active trader', they may be supporting their claim with irrelevant data Their definition of 'active trader' could mean any one or more of the following: 1) retail investor 2) day trader 3) mutual fund 4) professional investor 5) fund continuously changing its position 6) hedge fund. I will go through all of these. 1) Most retail traders lose money. There are many reasons for this. Some rely on technical strategies that are largely unproven. Some buy rumors on penny stocks in hopes of making a quick buck. Some follow scammers on twitter who sell newsletters full of bogus stock tips. Some cant get around the psychology of trading, and thus close out losing positions late and winning positions early (or never at all) [I myself use to do this!!]. I am certain 99% of retail traders cant beat the market, because most of them, to be frank, put less effort into deciding what to trade than in deciding what to have for lunch. Even though your pension funds presentation is correct with respect to retail traders, it is largely irrelevant as professionals managing your money should not fall into any of these traps. 2) I call day traders active traders, but its likely not what your pension fund was referring to. Day trading is an entirely different animal to long or medium term investing, and thus I also think the typical performance is irrelevant, as they are not going to manage your money like a day trader anyway. 3,4,5) So the important question becomes, do active funds lose 99% of the time compared to index funds. NO! No no no. According to the WSJ, actively managed funds outperformed passive funds in 2007, 2009, 2013, 2015. 2010 was basically a tie. So 5 out of 9 years. I dont have a calculator on me but I believe that is less than 99%!   Whats interesting is that this false belief that index funds are always better has become so pervasive that you can see active funds have huge outflows and passive have huge inflows. It is becoming a crowded trade. I will spare you the proverb about large crowds and small doors. Also, index funds are so heavily weighted towards a handful of stocks, that you end up becoming a stockpicker anyway. The S&P is almost indistinguishable from AAPL. Earlier this year, only 6 stocks were responsible for over 100% of gains in the NASDAQ index. Dont think FB has a good long term business model, or that Gilead and AMZN are a cheap buy? Well too bad if you bought QQQ, because those 3 stocks are your workhorses now. See here 6) That graphic is for mutual funds but your pension fund may have also been including hedge funds in their 99% figure. While many dont beat their own benchmark, its less than 99%. And there are reasons for it. Many have investors that are impatient. Fortress just had to close one of its funds, whose bets may actually pay off years from now, but too many people wanted their money out. Some hedge funds also have rules, eg long only, which can really limit your performance. While important to be aware of this, that placing your money with a hedge fund may not beat a benchmark, that does not automatically mean you should go with an index fund. So when are index funds useful? When you dont want to do any thinking. When you dont want to follow market news, at all. Then they are appropriate.

negative: "Rolling an old 401k into a new 401k is generally only for ease of management. For example, how many bank accounts do you really want? As long as the funds are reasonably allocated I've found it can be a useful ""mind game"" to leave it separate. Sometimes it's desirable to ignore an account and let it grow, and it is a nice surprise when finally adding all the account balances together. In other words, I keep thinking I've got X (the amount of my biggest or current 401k), which affects/helps my habits and desire to save. When I add them all together I'm shocked to find out I've got Y (the total of all accounts). Personally, I've had big paperwork problems transferring an old 403b (same type process as 401k) even when I had an adviser helping me move it. In the end it was worth moving it, because I'm having the adviser manage it. I'm actually writing this answer specifically because I recently moved a big 401k into a Traditional IRA. A rep from the brokerage, representing my previous employer, kept calling me to find out how they could help (I didn't brush him off). I found that using an IRA provided me with the opportunity to do self-guided investments in funds or even individual stocks, well beyond the limited selection of the old company's 401k. It was useful/interesting to me to invest in low-fee vehicles such as index funds (ie: the Buffett recommendation), and I'll find some stocks as well. Oh and when the old company 401k has certain funds being discontinued, I didn't want to notice the mandated changes years later. So, I'd suggest you consider management and flexibility of the 401k or equivalent, and any of your special personal circumstances/goals. If you end up with a few retirement accounts, I suggest you use an account aggregating website to see or follow your net worth. I know many who, based on various concerns and their portfolio, find an acceptable website to use."

negative: "Lifecycle funds might be a suitable fit for you. Lifecycle funds (aka ""target date funds"") are a mutual fund that invests your money in other mutual funds based on how much time is left until you need the money-- they follow a ""glide-path"" of reducing stock holdings in favor of bonds over time to reduce volatility of your final return as you near retirement.  The ones I've looked at don't charge a fee of their own for this, but they do direct your portfolio to actively managed funds. That said, the ones I've seen have an ""acquired"" expense ratio of less than what you're proposing you'd pay a professional. FWIW, my current plan is to invest in a binary portfolio of cheap mutual funds that track S&P500 and AGG and rebalance regularly. This is easy enough that I don't see the point of adding in a 1 percent commission."

negative: "Morningstar is often considered a trusted industry standard when it comes to rating mutual funds and ETFs.  They offer the same data-centric information for other investments as well, such as individual stocks and bonds.  You can consult Morningstar directly if you like, but any established broker will usually provide you with Morningstar's ratings for the products it is trying to sell to you. Vanguard offers a few Emerging Markets stock and bond funds, some actively managed, some index funds.  Other investment management companies (Fidelity, Schwab, etc.) presumably do as well.  You could start by looking in Morningstar (or on the individual companies' websites) to find what the similarities and differences are among these funds.  That can help answer some important questions: I personally just shove a certain percentage of my portfolio into non-US stocks and bonds, and of that allocation a certain fraction goes into ""established"" economies and a certain fraction into ""emerging"" ones.  I do all this with just a few basic index funds, because the indices make sense (to me) and index funds cost very little."

negative: Wow, hard to believe not a single answer mentioned investing in one of the best asset classes for tax purposes...real estate.  Now, I'm not advising you to rush out and buy an investment property.  But rather than just dumping your money into mutual funds...over which you have almost 0 control...buy some books on real estate investing.  There are plenty of areas to get into, rehabs, single family housing rentals, multifamily, apartments, mobile home parks...and even some of those can have their own specialties.  Learn now! And yes, you do have some control over real estate...you control where you buy, so you pick your local market...you can always force appreciation by rehabbing...if you rent, you approve your renters.  Compared to a mutual fund run by someone you'll never meet, buying stocks in companies you've likely never even heard of...you have far more control. No matter what area of investing you decide to go into, there is a learning curve...or you will pay a penalty.  Go slow, but move forward. Also, all the advice on using your employer's matching (if available) for 401k should be the easiest first step.  How do you turn down free money?  Besides, the bottom line on your paycheck may not change as much as you think it might...and when weighed against what you get in return...well worth the time to get it setup and active.

negative: Buying the right shares gives higher return. Buying the wrong ones gives worse return, possibly negative. The usual recommendation, even if you have a pro advising you, is to diversify most of your investments to reduce the risk, even though that may reduce the possible gain. A mutual fund is diversification-in-a-can. It requires little to no active maintenance. Yes, you pay a management fee, but you aren't paying per-transaction fees every time you adjust your holdings, and the management costs can be quite reasonable if you pick the right funds; minimal in the case of computer-managed (index) funds. If you actively enjoy playing with stocks and bonds and are willing/able to accept your failures and less-than-great choices as part of the game, and if you can convince yourself that you will do better this way, go for it. For those of us who just want to deposit out money, watch it grow, and maybe rebalance once a year if that, index funds are a perfectly good choice. I spend at least 8 hours a day working for my money; the rest of the time, I want my money to work for me.  Risk and reward tend to be proportional to each other; when they aren't, market prices tend to move to correct that. You need to decide how much risk you're comfortable with, and how much time and effort and money you're willing to spend managing that risk. Personally, I am perfectly happy with the better-than-market-rate-of-return I'm getting, and I don't have any conviction that I could do better if I was more involved. Your milage will vary. If folks didn't disagree, there wouldn't be a market.

negative: In summary, you are correct that the goal of investing is to maximize returns, while paying low management fees.  Index investing has become very popular because of the low fees.  There are many actively traded mutual funds out there with very high management fees of 2.5% and up that do not beat the market.  This begs the question of why you are paying high management fees and not just investing in index funds. Consider maxing out your tax sheltered accounts (401(k) and ROTH IRA) to avoid even more fees on your returns. Also consider having a growth component of your portfolio which is generally filled with equity, along with a secure component for assets such as bonds.  Bonds may not have the exciting returns of equity, but they help to smooth out the volatility of your portfolio, which may help to keep peace of mind when the market dips.

negative: I assume that with both companies you can buy stock mutual funds, bonds mutual funds, ETFs and money market accounts. They should both offer all of these as IRAs, Roth IRAs, and non-retirement accounts.  You  need to make sure they offer the types of investments you want. Most 401K or 403b plans only offer a handful of options, but for non-company sponsored plans you want to have many more choices. To look at the costs see how much they charge you when you buy or sell shares. Also look at the annual expenses for those funds. Each company website should show you all the fees for each fund. Take a few funds that you are likely to invest in, and have a match in the other fund family, and compare. The benefit of the retirement accounts is that if you make a less than perfect choice now, it is easy to move the money within the family of funds or even to another family of funds later. The roll over or transfer doesn't involve taxes.