Ch. 15: Investing Through Mutual Funds

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Ch. 15: Investing Through Mutual Funds by Mind Map: Ch. 15: Investing Through Mutual Funds

1. Mutual fund

1.1. an investment company that pools funds by selling shares & makes diversified investments

1.2. portolio

1.2.1. combined holdings of a mutual fund

1.3. net asset value

1.3.1. per share value of a mutual fund

1.4. mutual fund dividend

1.4.1. income paid to investors based on profits from firms in the fund

1.5. capital gain distribution

1.5.1. capital gains - capital losses

1.6. unique services

1.6.1. automatic reinvestment

1.6.1.1. reinvest dividends & capital gains

1.6.2. exchange privilege

1.6.2.1. can swap shares in 1 fund for shares in another fund

1.6.3. beneficiary designation

1.6.3.1. designate beneficiary to avoid probate court

1.6.4. withdrawal options

1.6.4.1. can pull out $ on a regular basis

2. Mutual fund types

2.1. 3 categories:

2.1.1. income

2.1.1.1. money market fund

2.1.1.1.1. highly liquid

2.1.1.1.2. safe

2.1.1.1.3. short maturity, < 1 year

2.1.1.2. bond funds

2.1.1.2.1. invest in bonds & stocks with high dividends

2.1.2. growth

2.1.2.1. aggressive growth

2.1.2.1.1. seek the greatest long-term capital appreciation

2.1.2.2. growth

2.1.2.2.1. invests in companies with higher than average revenue & growth

2.1.2.3. growth & income

2.1.2.3.1. invests in companies with dividend income & price appreciation

2.1.2.4. value

2.1.2.4.1. invests in sound companies with low prices

2.1.3. income & growth

2.1.3.1. balanced funds

2.1.3.1.1. keeps a set mix of stocks & bonds

2.1.3.2. asset allocation funds

2.1.3.2.1. invests in stocks, bonds, cash equivalents, international assets, gold, real estate

2.1.3.3. target-date retirement funds

2.1.3.3.1. allocation of stocks, bonds, cash

2.1.3.3.2. allocation based on age & risk tolerance

3. Mutual fund fees & charges

3.1. load funds

3.1.1. load is the commission paid to broker

3.1.1.1. in 3%-8.5% range

3.1.2. types

3.1.2.1. front-end load

3.1.2.1.1. paid when bought

3.1.2.2. back-end load

3.1.2.2.1. paid when shares are sold

3.1.2.3. no-load

3.1.2.3.1. can purchase at net asset value without a sales charge

3.1.2.3.2. deliver higher returns