Академический Документы
Профессиональный Документы
Культура Документы
McGraw-Hill/Irwin
4. Describe how and why mutual funds are bought and sold.
13-2
Objective 1
Explain the Characteristics of Mutual Fund Investments Mutual Fund = an investment vehicle offered by investment companies to those who wish to:
Pool money Buy stocks, bonds, and other financial securities Have buy/sell decisions made by a fund manager
Investment Company
Pools the money of many investors its shareholders to invest in a variety of securities Employs the fund manager who is compensated for selecting securities appropriate to the funds stated objective
Financial Intermediary
13-4
Diversification
Investors funds are used to purchase a variety of investments Risk reduction
13-5
Characteristics of Funds
Closed-end funds
Fixed number of shares Trade like shares of common stock Actively managed
Exchange-traded Funds
Invests in securities contained in a specific securities index
Closed-End Funds
Fixed number of shares issued when the
fund is organized Shares traded on stock exchanges Trade price set by supply & demand Most sell at a discount relative to their net asset value Discount is sometimes substantial
13-7
Low management fees Trade on exchanges throughout the day like stock
Prices determined by supply and demand
13-9
Open-End Funds
Open-end funds 90% of all funds
Shares issued and redeemed by the investment company at the request of investors Investors free to buy and sell shares at the net asset value (NAV)
13-10
Paid every time shares purchased Purchased through brokerage firms or registered representatives
Salespeople prepared to explain the fund and help determine if it meets the investors financial goals
13-11
13-12
13-13
12b-1 fees
Annual fee to defray advertising and marketing costs Cannot exceed 1% of AUM per year
Expense ratio
Total expenses associated with the management fees and operating costs of the fund
13-14
13-15
Objective 2
Classify Mutual Funds by Investment Objective
Long-term Funds
Stock Funds
Bonds Funds
Other Funds
13-16
Stock Funds
Long-term Funds Stock Funds Bonds Funds Other Funds
Aggressive Growth Growth Equity income Small-cap Mid-cap Large-cap Global Regional International Index funds Sector funds Socially responsible
Company Size
% U.S. vs. International Match index holdings Economic Sectors Invest in socially responsible firms
13-17
Bond Funds
Long-term Funds Stock Funds Bonds Funds Other Funds
High-yield Intermediate Corporate bonds Intermediate U.S. Gov't bonds Long-term corporate bonds Long-term U.S. gov't bonds Municipal bonds Short-term corporate bonds Short-term U.S.gov't bonds
13-18
Other Funds
Long-term Funds Stock Funds Bonds Funds Other Funds
Asset Allocation Funds Balanced Funds Fund of Funds Lifecycle Funds Money Market Funds
13-19
A Family of Funds
One investment company manages a group of mutual funds
Each fund has a different financial objective Exchange privileges allow movement from one fund to another within the family with low or no charge
Fidelity Investments
http://personal.fidelity.com/products/fu nds/mutual_funds_overview.shtml.cvsr
13-20
Objective 3
Evaluate Mutual Funds
Managed Funds vs. Index Funds Managed fund a fund manager makes all decisions regarding what securities are included in the funds portfolio Index fund securities held by the fund replicate those contained in a specific index like the S&P 500
13-21
www.vanguard.com
13-22
Financial Publications
Business Week, Forbes, Kiplinger's Personal Finance and Money Business Weeks mutual fund survey includes:
Funds overall rating compared to all other funds, and to funds in the same category Fund size, sales charge and expense ratio Historical returns for the past ten years
13-25
Objective 4
Describe How and Why Mutual Funds are Bought and Sold
13-26
Return on Investment
3 Ways to Make Money on Mutual Funds Income Dividends
Earnings paid from dividend and interest income Taxed as ordinary income
Purchase Options
Fund Type Closed End Exchange Traded Open End No Load Purchase From Stock exchange or Over-the-counter market Fund Management Co. Authorized Agent Fund Supermarket*
Load
* Investor may deal with one company, get one statement, yet have a choice of a wide variety of funds
13-28
Reinvestment plans
Automatically reinvests dividends and capital gains in the fund
13-29
Withdrawal Options
Closed-end funds & exchange-traded
funds
Traded on stock exchanges and in the over the counter market Sold like common stock shares
Open-end fund
Shares sold to the fund sponsoring company
13-30
13-31
END OF CHAPTER 13
13-32
Additional Video
Mutual Fund Awards BusinessWeek and S&Ps Best Fund Picks (Instructors see the notes section for directions.) SYNOPIS: Helpful information about how BusinessWeek and Standard & Poors evaluate mutual funds is provided in this video. In addition, specific funds that are highly rated in the BusinessWeek survey are recommended. 1. Explain why investors still need to evaluate mutual funds when there is a professional manager or team of managers that choose the investments for a mutual fund. 2. What factors did BusinessWeek and Standard & Poors use to evaluate mutual funds? Would these same factors help you evaluate a mutual fund for your investment portfolio? 3. Specific small-cap, technology, and growth funds were described in this video. How would you research one of these funds to determine if the fund could help you obtain your investment goals?
13-33