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Mutual FUnds

Mutual FUnds. Mike Mercado. Mutual Funds. Review Breakdown of Funds Family of Funds Share Classes Fees & Expenses Top 10 Mutual Funds Mutual Fund Scenario Questions. MUTUAL FUNDS. Portfolios of securities, mainly stocks, bonds and money market instruments Aspects:

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Mutual FUnds

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  1. Mutual FUnds Mike Mercado

  2. Mutual Funds • Review • Breakdown of Funds • Family of Funds • Share Classes • Fees & Expenses • Top 10 Mutual Funds • Mutual Fund Scenario • Questions

  3. MUTUAL FUNDS • Portfolios of securities, mainly stocks, bonds and money market instruments • Aspects: • Investors own a pro rata share of the overall portfolio • The investment manager of the mutual fund actively manages the portfolio • NAV or price of the fund is determined only once each day, at the close of the day • All new investments into the fund or withdrawals from the fund during a day are priced at the closing NAV

  4. MUTUAL FUNDS • Characteristics • The number of shares of these funds increases or decreases as investors increase their investment of liquidate shares • The fund company facilitates these increases or decreases by selling new shares to or buying existing shares from the investor • These new investments of liquidations occur via the fund company (not an external market) at a price equal to NAV • All shares are taxed regardless of holding period

  5. MUTUAL FUNDS • Advantages • Diversification • Liquidity • Professional Management • Investing • Tax information/documentation

  6. Mutual Fund Break Down

  7. FAMILY OF FUNDS • A group of mutual funds offered by one or more fund company. Generally, the constituent funds cover a wide range of fund categories of and investment objectives. • Common Families of Funds • American • Fidelity • T. Rowe Price • Vanguard

  8. Share Classes • A Shares: Class A shares typically charge a front-end sales charge. When you buy Class A shares with a front-end sales charge, a portion of your dollars is not invested. Class A shares may impose an asset-based sales charge • B Shares: Class B shares generally do not have a front-end sales charge. They may, however, impose a contingent deferred sales load and a higher 12b-1 fee (than Class A shares), along with other annual expenses. The contingent deferred sales charge is paid when you sell your shares.  The contingent deferred sales charge will normally decline and be eliminated the longer you hold your shares. Once this happens they then often convert to Class A shares • C Shares: Class C shares do not impose a front-end sales charge on the purchase, so the full dollar amount that you pay is invested. Often Class C shares impose a small charge (often 1 percent) if you sell your shares within a short time, usually one year.

  9. Fees and Expenses • Contingent Deferred Sales Charge (CDSC): This fee is charged when you sell your mutual fund shares. • Expense Ratio: A measure of the fund's total annual expenses expressed as a percentage of the fund's net assets. • Front-End Sales Charge: This fee is charged when you purchase mutual fund shares. • Asset-Based Sales Charges: These are fees you would not pay directly, but which are taken out of a mutual fund's assets to pay to market and distribute its shares. • 12B-1 Fee: An annual marketing or distribution fee . Is included in the Expense Ratio • Breakpoint Discounts: A mutual fund may offer you discounts, called breakpoint discounts, on the front-end sales charge if you: Make a large purchase. Already hold other mutual funds offered by the same fund family. Commit to regularly purchasing the mutual fund's shares.

  10. Top Ten Mutual Funds

  11. Mutual Fund Scenario Results

  12. Conclusion • Take advantage of company match for pension plan • When picking your mutual fund plan understand: • Portfolio risk • Penalties • Fees & Expenses • Taxes

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