1 / 19

Chapter 4 Appendix Mutual Fund Evaluation Term Project

Chapter 4 Appendix Mutual Fund Evaluation Term Project. A small man – anyone with a portfolio of, say, under $100,000 – is unlikely to do as well investing his own money as he can do in a no-load fund - Paul Samuelson. Outline. Introduction Classification of mutual funds. Introduction.

capricorn-rosas
Télécharger la présentation

Chapter 4 Appendix Mutual Fund Evaluation Term Project

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Chapter 4 AppendixMutual Fund Evaluation Term Project

  2. A small man – anyone with a portfolio of, say, under $100,000 – is unlikely to do as well investing his own money as he can do in a no-load fund - Paul Samuelson

  3. Outline • Introduction • Classification of mutual funds

  4. Introduction • A mutual fund is an existing portfolio of assets into which someone may invest directly • Facilitates diversification

  5. Introduction (cont’d) • Mutual funds are extremely popular investment vehicles for both the small and the large investor • Many institutions place a substantial part of their money with mutual funds • By the end of 2000, about 8,300 mutual funds with assets totaling $6.9 trillion

  6. Classification of Mutual Funds • Open-end versus closed-end • Net asset value versus market value • Load versus no-load • Management fees • Buying mutual fund shares • Mutual fund objectives

  7. Open-End Versus Closed-End • There are two types of investment companies: • Open-end funds: • May grow in size as new investors open accounts • May grow in size as existing investors add to their accounts • Have no set number of shares outstanding • Buy back their shares from investors (redemption)

  8. Open-End Versus Closed-End (cont’d) • There are two types of investment companies (cont’d): • Closed-end funds: • Have a fixed number of shares that trade like shares of common stock • Are unmanaged portfolios of stock with each share representing partial ownership of the portfolio • May trade on an exchange • Can be sold to other investors

  9. Net Asset Value Versus Market Value • You buy and sell an open-end fund based on its net asset value • Open-end fund: equals the fund’s assets minus its liabilities divided by the number of shares currently existing in the fund • Closed-end fund: trades at market-determined portfolio prices that may be more or less than the net asset value

  10. Load Versus No-Load • Load funds: • Have a sales charge associated with the purchase of new shares • A commission split between: • A mutual fund salesperson • An investment firm • A national distributor • Typically ranges between 1.0% and 8.5%

  11. Load Versus No-Load (cont’d) • No-load funds: • Have no sales charge • Shares are bought and sold at net asset value

  12. Examples of Exchange-Traded Funds

  13. Management Fees • Management fees include: • Postage costs • Clerical time • Commissions on the underlying assets • Redemption fee • A fee to pay redemption expenses, ranging between 1% and 2%

  14. Management Fees (cont’d) • Management fees include (cont’d): • Management fee • Paid to fund manager • Taken directly from the fund’s assets • Averages about 0.5% of fund’s total assets

  15. Buying Mutual Fund Shares • Fund prospectus outlines: • The fund’s purpose • The management team • The mailing address and phone number • The fund’s intended investment activity • Funds also provide descriptive brochures and a letter to inquiries

  16. Buying Mutual Fund Shares (cont’d) • New account application asks for: • Name, address, tax ID • Investor’s choice of shareholder options: • Dividend reinvestment • Automatic monthly investment • Systematic withdrawal • IRA designation • Telephonic fund switching option

  17. Mutual Fund Objectives • The fund objective is the type of investment anticipated: • Capital appreciation and growth funds seek appreciation in the value of shares • Income funds seek current income from fixed-income securities and from dividends • Growth and income funds seek a combination of income and capital appreciation

  18. Mutual Fund Objectives (cont’d) • The fund objective is the type of investment anticipated (cont’d): • Balanced invest in growth and income securities • Bond funds invest in debt only • Money market funds seek stability of principal through investment in short-term debt instruments

  19. Mutual Fund Objectives (cont’d) • The fund objective is the type of investment anticipated (cont’d): • Tax-free funds invest in municipal securities that are free from federal and sometimes state taxes • Special-purpose funds may focus on a particular industry or region

More Related