lap: qs-035 objectives discuss reasons individuals choose to invest in mutual funds. explain how to...
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LAP: QS-035LAP: QS-035
ObjectivesObjectives
Discuss reasons individuals choose
to invest in mutual funds.
Discuss reasons individuals choose
to invest in mutual funds.
Explain how to buy/sell mutual
funds.
Explain how to buy/sell mutual
funds.
Mutual FundsMutual Funds
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ObjectiveObjective
Discuss reasons individuals choose to invest in mutual funds.
Discuss reasons individuals choose to invest in mutual funds.
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Alternative to investing in individual securities Alternative to investing in individual securities
A collection of shareholders’ money, invested by professional fund managers in an assortment of different securities
A collection of shareholders’ money, invested by professional fund managers in an assortment of different securities
Can help you reach a variety of financial goals Can help you reach a variety of financial goals
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Determines the price of a mutual fund’s shares
Determines the price of a mutual fund’s shares
(total portfolio value) (total portfolio value)
Calculated at the close of each business day Calculated at the close of each business day
(number of outstanding shares)
(number of outstanding shares)
– (liabilities) – (liabilities)
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Spreading outSpreading outMutual funds often contain Mutual funds often contain
your investment dollars among a number
of different securities
your investment dollars among a number
of different securities
100 or more100 or moresecurities.securities.
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They analyze all the factors with potential impact on your money.
They analyze all the factors with potential impact on your money.
Trained professionals make investment decisions for the fund.
Trained professionals make investment decisions for the fund.
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Simple to trade
Liquidity
Simple to trade
Liquidity
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SEC regulations
No bankruptcy
SEC regulations
No bankruptcy
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Managementcosts
Managementcosts
Taxes Taxes
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Can issue as many shares as investor demand calls for
Can issue as many shares as investor demand calls for
Can hold an unlimited number of shares
Can hold an unlimited number of shares
Can issue only a limited number of shares
Can issue only a limited number of shares
Determined before the fund is ever established
Determined before the fund is ever established
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Growth funds
Value funds
Blend funds
Sector funds
International funds
Also classified by “cap size”
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Rate
Maturity
Credibility
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Contain both stocks and bondsContain both stocks and bonds
Relatively higher rates of return over the short term
Relatively higher rates of return over the short term
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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
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“Cousins” of mutual funds that trade like individual stocks
Prices depend on supply and demand rather than NAV.
“Spiders”
“Cubes”
“Cousins” of mutual funds that trade like individual stocks
Prices depend on supply and demand rather than NAV.
“Spiders”
“Cubes”
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ObjectiveObjective
Explain how to buy/sell mutual funds.
Explain how to buy/sell mutual funds.
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Where to BuyWhere to BuyReputable investment companyReputable investment company
• Vanguard• Vanguard
• Fidelity• Fidelity
• T. Rowe Price• T. Rowe Price
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Banks Banks
Financial planners Financial planners
Insurance agencies Insurance agencies
All will charge you commissions, or
All will charge you commissions, or
NotNot to Buyto BuyWhereWhere
“loads.”“loads.”
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Commissions Commissions
Look for expense ratios of 1.5 percent or less.
Look for expense ratios of 1.5 percent or less.
Managerial fees Managerial fees
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• Avoid “load” fees.
• Phone
• Online
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Mutual funds that support your ideals and principles
Mutual funds that support your ideals and principles
• Anti-tobacco• Anti-tobacco
• Anti-alcohol• Anti-alcohol
• Anti-gambling• Anti-gambling
Quick CaseQuick Case
• Pro-religion• Pro-religion
• Environmentally friendly
• Environmentally friendly
ExamplesExamples
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MarkED
Acknowledgments
Original DevelopersLelia Ventling and Sarah Bartlett Borich,
MarkED
Version 1.0
Copyright 2007MarkED Resource Center
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