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Solid Finances Sponsors

Solid Finances Sponsors. MSU Extension MSU Human Resources This program is made possible by a grant from the FINRA Investor Education Foundation through a partnership with United Way Worldwide. Mutual Funds. Question A (Practice): My Age is:. Under 30 31-40 41-50 51-60 Over 60.

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Solid Finances Sponsors

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  1. Solid Finances Sponsors • MSU Extension • MSU Human Resources • This program is made possible by a grant from the FINRA Investor Education Foundation through a partnership with United Way Worldwide.

  2. Mutual Funds

  3. Question A (Practice): My Age is: • Under 30 • 31-40 • 41-50 • 51-60 • Over 60

  4. Question on Proxy Voting • Owners of a company typically have the right to vote on certain issues. • Election of Board of Directors • Voting take place in two ways: • Mailballot • In person vote • Proxy voting allow a shareholder to give their right to vote to another person.

  5. Question B: Are mutual funds the main investment choices for your employer retirement plan? • Yes • No • Not sure

  6. Question C: Do you currently own mutual funds? • Yes, in an employer sponsored plan • Yes, outside of an employer plan • Both 1 & 2 • No

  7. Question D: What was the Top Reason You Invested in Mutual Funds? • Diversification • Professional Management • Best Investment Choice • Only Option in my Retirement Plan • Other

  8. Question E: How many mutual funds are in the U.S.? • 847 • 1,280 • 1,753 • 3,248 • 8,015

  9. What is a Mutual Fund? • A Mutual Fund is a large basket that contains other investments. • A fund may contain billions of dollars. • Shares are sold that represent ownership in the fund. • A fund manager is hired to research and select investments.

  10. Fund Management • When the fund was started as set of rules was established that govern how the fund will operate. • Prospectus • Summary Prospectus (100 plus pages) • Summary of Additional Information

  11. How do I select a Mutual Fund? • Asset Allocation • Available Options

  12. Things to consider • Past performance • Fees • Types of Fees • Amount of Fees • Management Team • Customer Service • Features: Internet Access, Local Representative, 24 hour call center, E-statements, planning tools

  13. Understanding Past Performance • John invest $1,000 on January 1st • John earns 23.3%

  14. Understanding Past Performance • John invest $1,000 on January 1st • John earns 30.2%

  15. Fees • Sales “load” Fee • Front Load: Sales charge when you buy a share (Max of 8.5%) • Back-Load: Sales charge when you sell a share • No-Load: No Sales charge for buying or selling • Redemption Fee • Fee for redeeming shares (max of 2%) • Exchange Fee • Fee for transferring funds between two funds in the same family.

  16. Fees • Account Fee • Fee charged for having an account (annual, quarterly, etc.) • Management Fee • Fees paid as a percentage of assets to the mutual fund company for “managing” the fund. • Shareholder Service Fee (12b-1) • Fees charged to cover cost of customer service. • Other Fee • Wire transfer fees, check writing fees, etc.

  17. Do fees matter? • If you invest $1,000 in two funds • 1% total fees & 0.75% total fees • Both funds have 4% return before fees

  18. Question F: Which has lower total fees for a 5 year investment? • 1% Management Fee with no sales charge • 0.5% Management Fee with 4% Sales Charge

  19. Which has lower fees?

  20. Fee Summary • Short Term Investments • Transaction Fees are important • Sales fees, exchange fees, redemption fees • On-Going Fees are less important • Management fees, 12B-1 • Long Term Investments • Transaction Fees are less important • Sales fees, exchange fees, redemption fees • On-Going Fees are important • Management fees, 12B-1

  21. Customer Service • What is important to you? • Internet Management • Phone Access • Local Representative • Multiple Fund Families • Are you willing to pay higher fees to get these features?

  22. Management Team • Tenure • How long has the manager been with the fund or company? • System • One Manager vs. a Team of Managers • Shared or Separate Analysts

  23. Finding Fund Information • Options, Options, Options • Current Investor: Quarterly & Annual Statements • Prospectus: Legal Rules of how the Fund Operates • Ratings Agency Overview • Fund Company Website • Call the Fund Company • A Local Broker • Other Finance Websites

  24. Fund Ratings • Compares Fund to other similar funds • Ratings Consider: Returns, Fees, Volatility, etc. • Morning Star Ratings: Top 10% = 5 stars Next 22.5% = 4 stars Next 35% = 3 stars Next 22.5% = 2 stars Next 10% = 1 star

  25. Sector Information • Diversity reduces risk • Compare across funds • Bond Holding Information • Bond types by ratings • Average Maturity

  26. Current Asset Categories • Top Holdings • Company Information • Diversification Information 26

  27. Web Resources • Fund Company Sites • Pros: Typically Free, First hand information • Cons: No information on the competition • Free Sites • Pros: Great for comparisons • Cons: Features & information vary widely • Brokerage Sites • Pros: Often more user friendly tools • Cons: Often must be an account holder

  28. Questions

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