The Model Info Center

Have you heard that new babies get a free £250 voucher from the the State to place in a Child Trust Fund. The child’s voucher can be invested in any one of threekinds of CTF account, Stakeholder - a shares-based account that changes into cash, a savings account or a shares account.

Scottish Friendly is an accredited provider of the Child Trust Fund. The State is eager for people to have access to Stakeholder accounts and this is the form of account that we supply. This means that:

• Investments go into our Managed Growth Fund, which

intends to provide good growth potential.

• It invests in part in shares to get the benefit of potentially higher returns over 18 years,compared to a cash deposit account (although the value of shares can go down as well as go up whereas capital would be protected in a deposit account).

• It comes with a low ‘Stakeholder’ funds charge of just 1.5When attaining the age of 18 per year

• young person the receive will totally a lump sum, prevailing law free of Capital Gains and Income Tax under It’s.

• extra affordable - put payments can be as little as in the account from can £10

Anyone - parents, grandparents, aunts and uncles, friends - contribute an uppermost limit to the Child Trust Fund to increase of £1,200 per year to help cannot

the child’s Fund (once added, this money All this means be withdrawn).offers our Stakeholder account possible a good balance between lower high returns and a There’s level of risk. additional also the complies assurance that our account Nevertheless with the Government’s stakeholder criteria. does not this guaranteed mean that returns are suitable or that Stakeholder accounts are Bear in mind for everyone. decrease that the value of shares in the Managed Growth Fund (where your Child Trust Fund money is invested) can rise as well as whose birthday is and is not guaranteed.

Only children eligible on or after 1st September 2002 are open a to older kids Child Trust Fund. If you have qualified who are not contemplate you could saving intended for them with a Child Bond - it’s a tax-free savings plan for long-term growth.

One of those investment counselors says, “I will take your money and make you a profit every year, but I have a very hefty fee. For every
dollar I make you I will charge you a dollar”.

“How much will you make for me?”

He replies, “Because I invest in the stock
market I am not sure what each year will be, but
I have a real time track record that I have
doubled my clients money every three years. If
you start with $10,000 you should have $20,000
three years from now.”

“In other words out of the $20,000 you make
with my money you get half? That seems like an
awful lot.”

Mr. Money Manager asks, “Does it make any
difference how much I make if I can double your
money?”

Here we are computing a 50% expense ratio.
Who cares as long as he doubles the money? When you
talk to brokers when buying mutual funds one of their
pet talking points is that a particular fund has
a very low expense ratio. Who cares? The only
thing that is important is the final return.

Does it make any difference if a fund has a
3.5% expense ratio or a 1% expense ratio if the
3% fund makes more money? Of course not.

This is part of the Wall Street mystique
designed to confuse clients. Whatever mutual
fund you choose it should be one that has the
highest return. When it is no longer going up it
should be switched to a better performing fund
that is why you should only buy no-load funds.
Full service brokerage companies do not want to
sell no-load funds.

Commissions are expenses, but brokers don’t
talk about that. Do NOT pay commission. Brokers
will tell you that load (commission) funds are
better than no-load funds. Not true. Get up and
walk away from that broker. He is lying. Be
careful of certain types of mutual funds that
will have several classes of the same fund some
of which have hidden commissions. Don’t be
afraid to ask. To be absolutely sure call the
mutual fund company. They all have toll free
numbers.

There is only one way to make sense out of
expenses and expense ratios and that is the
performance of the fund in relation to all other
funds. First eliminate commissions. All other
expenses are apportioned over the year. One
other nasty charge funds have started adding is
redemption fees. Most are 2% and run out for
long periods of time. These are added to
discourage selling; no other reason.

There is only one thing that distinguishes
a “good” fund from any other. It is going up while
the investor owns it. If it doesn’t you should
not have it. When it starts down it should be
sold and this has nothing to do with expense
ratios.

There is only one reason to own any equity
and it has nothing to do with expenses. It must go
up.

Copyright 2006

Al Thomas’ best selling book, “If It Doesn’t
Go Up, Don’t Buy It!” has helped thousands
of people make money and keep their profits
with his simple 2-step method. Read the first
chapter and receive his market letter for 3
months at no charge at
http://www.mutualfundmagic.com and discover why
he’s the man that Wall Street does not want
you to know.

The “stagnant” scenario

When we apply the covered call strategy to the stagnant stock
scenario, we take a negative return scenario and turn it into a
positive scenario. Remember, when we sell an option, we receive
a premium for doing so.

When the stock does not move during the option’s life, the
extrinsic value of the option goes to zero. The amount of money
paid for the option goes to the seller. We’ll take a look at how
this sets up.

Let’s go back to our previous example with the stock trading at
exactly $9.50. We sell the front month, at-the-money call, which
would be the 10 strike call. We sell the front month 10 strike
calls at $.50. As time goes by, there is less chance for the
option to become “in-the-money”. As this happens, the extrinsic
value lessens and finally, after Friday expiration, the option
is worthless.

The stock finishes at $10.00 and you have received no capital
appreciation but you have received the full $.50 of extrinsic
value from the option sale. If the studies are correct and
selling the premium works 80% of the time, then you will collect
approximately $4.00 per contract sold over the course of the
year.

As the examples demonstrate, writing covered calls against a
stagnant stock can provide you with an acceptable return instead
of frustration, wasted time and capital.
The “down” scenario

In the final scenario, where your stock purchase is headed down
into negative territory, the covered call strategy can help
minimize your losses. Although picking losers and incurring
losses is inescapable, it can be minimized and controlled. Let’s
take a look at how the buy-write can help us do that.

For example, let’s say you bought a stock for $9.50 and at the
end of the month the stock had traded down to $8.50, you would
have a $1.00 loss on our investment.

However, if you had sold the 10 strike calls for $.50, you would
only have a $.50 loss. You would have a $1.00 capital loss in
the stock, but a $.50 option gain from selling the option, which
would expire worthless.

If you were going to buy the stock anyway and incur a possible
loss, it is better to take a $.50 loss than a $1.00 loss. In
this down scenario, the option premium received helped to offset
the capital loss.

If the stock is down more than the amount you received for
selling the call, then the option premium serves as an offset to
the loss of the stock.

However, you can still make money in the “down scenario” using
the covered strategy if the stock is only down a small amount.
There is a scenario in the buy-write strategy where you can
profit from owning a stock that is lower than where you bought
it.

Going back to the previous example, you bought a stock for $9.50
and you sold the front month 10 strike calls for $.50. At
expiration, the stock finishes down $.20 at $9.30 You would have
incurred a $.20 loss on your stock.

However, with the stock at $9.30, the 10 strike call that you
sold for $.50 is now worthless. So, you have a $.20 loss on the
stock and a $.50 gain from the option premium sold. This leaves
you with a gain of $.30 on a stock that is down $.20 since the
time you purchased it.

To recap: in our third scenario, the “down scenario,” your loss
will be offset by the option premium you received so your loss
will not be as severe. You still may incur a loss, but it will
be minimized, and minimizing losses is a key to successful
investing.

For a complete breakdown of these three scenarios, please refer
to the table below.

Amazing Options Trading Strategies For Safer Investing
and Explosive Profits. Discover how to protect your
investments with the leveraged power of options. Step
by step video tutorials show you how. Click here now:
http://www.options-university.com