LAP: QS-035 Mutual Funds Objectives Discuss reasons individuals choose to invest in mutual funds. Explain how to buy/sell mutual funds.
Objective Discuss reasons individuals choose to invest in mutual funds.
ü Alternative to investing in individual securities ü A collection of shareholders’ money, invested by professional fund managers in an assortment of different securities ü Can help you reach a variety of financial goals
§ Determines the price of a mutual fund’s shares § (total portfolio value) – (liabilities) (number of outstanding shares) § Calculated at the close of each business day
Mutual funds Spreading out often contain your investment dollars 100 or more among a number securities. of different securities
They analyze all the factors with potential Trained professionals make investment impact on your money. decisions for the fund.
ü Simple to trade ü Liquidity
ü SEC regulations ü No bankruptcy
§ Taxes Management costs
§ Can issue only a as many limited number shares as investor of shares demand calls for Can hold an unlimited § Determined before number is ever the fundof shares established
§ Growth funds § Value funds § Blend funds § Sector funds § International funds § Also classified by “cap size”
§ Rate § Maturity § Credibility
Contain both stocks and bonds Relatively higher rates of return over the short term
§ Unique type of stock mutual fund that copies the performance of a particular stock market index § Standard and Poor’s 500 (S&P 500) § Nasdaq 100 § Passively managed— less expensive
§ “Cousins” of mutual funds that trade like individual stocks § Prices depend on supply and demand rather than NAV. § “Spiders” § “Cubes”
Objective Explain how to buy/sell mutual funds.
Reputable investment company Where to Buy • Vanguard • T. Rowe Price • Fidelity
Where Not to Buy ü Banks ü Insurance agencies ü Financial planners ü All will charge you commissions, or “loads. ”
ü Commissions ü Managerial fees ü Look for expense ratios of 1. 5 percent or less.
• Avoid “load” fees. • Phone • Mail • Online
§ Mutual funds that support your ideals and principles Examples • • • Anti-tobacco Anti-alcohol Anti-gambling • • Pro-religion Environmentally friendly Quick Case
Mark. ED Acknowledgments Original Developers Lelia Ventling and Sarah Bartlett Borich, Mark. ED Version 1. 0 Copyright 2007 Mark. ED Resource Center
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