Last week’s question and answer

I was founded in a poor region of Sweden in 1943 by Ingvar Kamprad, whose initials form part of my name. Ingvar got his start buying matches in bulk as a child and reselling them individually, before later moving on to selling seeds, fish and ballpoint pens. I issued my first catalog in 1951 and began designing my own wares in 1955. Today I’m a private company, with 400 million shoppers visiting my 201 stores annually. Many of my products require some assembly, but my meatballs require none. I offer “affordable solutions for better living.” Who am I? (Answer: IKEA)

There’s still time to refinance

The refinancing boom of the past several years is finally showing signs of slowing. Interest rates are widely expected to rise during the coming years. If you’re among the millions of homeowners who haven’t refinanced their mortgages yet, you owe it to yourself to at least look into it. Here are some reasons why:

• You can lock in a long-term, lower interest rate, thereby paying less each month.
• You can reconfigure your mortgage, perhaps taking out a 15-year loan instead of a 30-year one.
• You might opt for an adjustable-rate mortgage (ARM) if you plan to remain in your home for only a few more years, as ARMs sport extra-low rates.
• You may be able to take out extra money with your new loan, especially if your home has appreciated, as many have in recent years. These funds can pay off credit card debt or other higher-rate debts. Just don’t think of the money as a windfall, as it represents a chunk of your home’s value that should be put to good use.

When researching, first assess the myriad mortgage costs involved, such as the origination fee, discount points, the appraisal, the credit report, processing, title insurance and the escrow fee. Next, check out available loans and interest rates (made easy at Web sites such as www.bankrate.com).

Consider what “points,” if any, you might have to pay. A point is equal to 1 percent of the value of your loan. They’re paid upfront when you close the loan.

If you can get a new mortgage at a rate 1 or 1/2 a percentage point lower than your current mortgage, you may reap enormous interest savings over 15 to 30 years, depending on how much you borrow. For example, $100,000 borrowed at 7 percent instead of 8 percent for 30 years will save about $25,000 over the length of the loan. If you invest those savings, they can grow considerably.

Get many more tips on home financing and home buying at www.fool.com/homecenter and http://credit.about.com/library/howto/htrefinan.htm.

No soup for you

It’s easy to open a can of soup, but less easy to make a lot of money from it. Food giant Campbell Soup (NYSE: CPB) recently released a troubling second-quarter earnings report. Sales were up about 4 percent, and net income was flat over the prior-year period. While there were areas of strength — baking and snack foods, international operations, and specialty goods such as Godiva chocolate — the core U.S. soup, sauce and beverage business was about as feeble as watery cafeteria chicken soup.

Profit margins continue to be problematic, led by a 3.3 percent decrease in operating margins for the U.S. soup business. The firm expects boosted margins, though, from price hikes. But the soup business is highly competitive, and customers might migrate to other brands if they think the price is excessive.

The company has a double-digit return on assets, good free cash flow and invaluable brand value. But it also has low growth, very high debt and shaky margins. What’s more, while the dividend looks secure, the company’s dividend growth history isn’t anything to write home about.

With a rock-solid brand and industry-thumping returns on assets and capital, a turnaround in margins and overall earnings growth could make this an interesting stock at the right price. Until then, H.J. Heinz and Fresh Del Monte look a bit more interesting.

Don’t fall in love

My dumbest investment was 3dfx (which was once the major developer of 3-D graphics accelerator technology for computer games). When everyone who had a brain bailed out, I still held on for a miracle. Lesson learned: Never fall in love with a company. — Mark, Toronto, Canada

The Fool Responds: While it’s good to invest in companies and industries that you understand and like a lot, it’s also important to keep your perspective as objective as possible. Don’t let hopefulness overrule reason if you see major red flags such as declining performance. You’re not alone with 3dfx regrets. Back in early 1998, we bought shares of 3dfx for our Rule Breaker portfolio. The portfolio did well overall, but our 3dfx shares tanked. We sold nearly two years later, for a 60 percent loss. The company had shifted its focus toward manufacturing, which was less profitable. It also was facing stiffer competition.

We still believe in Rule Breaker investing, though, as when such investments pay off, they can do so in a big way (think eBay, Amazon, etc.).

Mutual fund lingo

What’s the difference between “fixed income” mutual funds and “equity income” mutual funds? — S.H., Mankato, Minn.

Fixed-income funds focus on bonds. Bonds are sometimes referred to as “fixed income” investments because when you buy a bond, it has a fixed interest rate and you know exactly what kind of income it will offer you.

Equity-income funds, meanwhile, focus on stocks that pay relatively high dividends, aiming to provide investors with regular streams of income. This is different from growth funds, which invest in companies whose stock is expected to advance, regardless of whether the companies even pay a dividend. Many fast-growing companies don’t pay any dividends, as they prefer to funnel most of their income into fueling their growth.

Mutual funds that focus on income are generally best suited to those who need regular distributions of cash, such as people in retirement. However, even retirees might remain invested in growth funds or individual growth stocks, simply selling off a portion each year to generate the income they need.