1. Other Fees
1.1. Management fee
1.1.1. compensation paid to professional managers who administer the fund’s investment portfolio
1.2. Administrative costs
1.2.1. the normal costs of doing business, eg. trading expenses
2. Types of Mutual Funds
2.1. Growth Fund:
2.1.1. primary goals are capital gains and long-term growth
2.2. Aggressive Growth Fund:
2.2.1. highly speculative mutual fund that seeks large profits from capital gains
2.3. Value Fund:
2.3.1. seeks stocks that are undervalued in the market
2.4. Equity-income Fund:
2.4.1. emphasizes current income and capital preservation
2.5. Balanced Fund:
2.5.1. generates a balanced return of both current income and long-term capital gains
2.6. Growth-and-Income Fund:
2.6.1. seeks both long-term growth and current income, with primary emphasis on capital gains
2.7. Bond Funds:
2.7.1. invests in various kinds and grades of bonds, with income as primary objective
2.8. Money Market Funds
2.9. Index Funds:
2.9.1. buys and holds a portfolio of stocks (or bonds) equivalent to those in a specific market index
2.10. Sector Funds:
2.10.1. investments are restricted to a particular segment of the market
2.11. Socially Responsible Funds:
2.11.1. funds that actively and directly incorporate ethics and morality into the investment decision
2.12. Asset Allocation Funds:
2.12.1. funds that spread investors’ money across stocks, bonds, and money market securities
2.13. International Funds:
2.13.1. funds that do all or most of their investing in foreign securities
3. Mutual Fund Investor Services
3.1. Automatic Investment Plans
3.2. Automatic Reinvestment of Interest, Dividends, and Capital Gains
3.3. Systematic Withdrawal Plans
3.4. Conversion (Exchange) Privileges
3.5. Phone Switching
3.6. Easy Establishment of Retirement Plans
4. Investor Uses of Mutual Funds
4.1. Accumulation of Wealth
4.2. Storehouse of Value
4.3. Speculation and Short-Term Trading
5. Selecting Mutual Funds
5.1. Determine if you want to use mutual funds in portfolio
5.2. Compare mutual fund’s investment objective to investor’s objective
5.3. Compare range of services offered
6. Factors in Comparing Mutual Funds
6.1. -Fund’s investment performance -Tax efficiency -Fee structure -How particular fund fits into your portfolio -Investment skills of fund managers -Load or No-Load funds -Closed-End or Open-End funds
6.2. Premium(or) discount=(share price-NAV)/NAV
7. Sources of Return from Mutual Funds
7.1. -Dividend income -Capital gains distributions -Change in price/NAV
8. Definition
8.1. Mutual Fund
8.1.1. -an investment company
8.1.2. -invests its shareholders’ money in a diversified portfolio of securities
8.1.3. -pools money from many investors.
9. Attractions
9.1. -Portfolio Diversification
9.2. -Professional management
9.3. -invest small amounts
9.4. -Service
9.5. -Convenience
10. Drawbacks
10.1. -Substantial Transaction Costs
10.2. -Lower-than-Market Performance
11. How Mutual Funds are Organized
11.1. Management - runs the funds’ daily operations
11.2. Investment advisor- buys & sells stocks / bonds & oversees the investment portfolio
11.3. Distributor -sells the fund shares
11.4. Custodian -physically safeguards the securities
11.5. Transfer agent- keeps track of purchases and redemption requests from shareholders
12. Calculating the Return
12.1. Holding period return = (Number of shares at end of period x ending price) - ( Number of shares at begining of period x initial price) ______________________________________________________________________ Number of shares at begining of period x initial price
13. The Management Company (6)
13.1. 1. Open-End Investment Companies
13.1.1. NAV= Value of securities / total share outstanding
13.2. 2. Closed-End Investment Companies
13.3. 3. Exchange-Traded Funds (ETF)
13.4. 4. Unit Investment Trusts (UIT)
13.5. 5. Real Estate Investment Trusts (REIT)
13.6. 6. Hedge Funds
14. Fees
14.1. Load Fund
14.1.1. charges a commission when shares are bought
14.2. No-load Fund
14.2.1. does not charge a commission when shares are bought
14.3. Low-load Fund
14.3.1. charges a small commission (2% - 3%) when shares are bought