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Lesson 22 Chapter 14 FIN 403 Principles of Investments. Homework Assignment. Break your large group into two smaller groups of approximately 5. Discuss your investing objectives, select a mutual fund and discuss how this fund will meet those objectives. Establishing Investment Goals.

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homework assignment
Homework Assignment

Break your large group into two smaller groups of approximately 5.

Discuss your investing objectives, select a mutual fund and discuss how this fund will meet those objectives.

establishing investment goals
Establishing Investment Goals

Financial goals should be specific and measurable. To develop your goals ask yourself..

Review: What is the acronym SMART

(specific, measurable, attainable, realistic, timely)

  • What will you use the money for?
  • How much will you need for your goals?
  • How will you obtain the money?
  • How long will it take you to obtain the money?
  • How much risk are you willing to assume in an investment program?
establishing investment goals1
Establishing Investment Goals
  • What possible economic or personal conditions could alter your investment goals?
  • Given your economic circumstances, are your investment goals reasonable?
  • Are you willing to make the sacrifices necessary, to you meet your investment goals?
  • What will the consequences be if you don’t reach your investment goals?
performing a financial checkup
Performing a Financial Checkup
  • Work to balance your budget.
    • Do you regularly spend more than you make?
  • Pay off high interest credit card debt first.
  • Obtain adequate insurance protection.
  • Start an emergency fund you can access quickly.
    • Three to nine months of living expenses.
  • Have access to other sources of cash for emergencies.
    • Line of credit is a short-term loan approved before the money is needed.
    • Cash advance on your credit card.
getting the money needed to start an investing program
Getting the Money Needed to Start an Investing Program
  • Pay yourself first.
  • Take advantage of employer-sponsored retirement programs.
  • Participate in elective savings programs.
    • Payroll deduction or electronic transfer.
  • Make extra effort to save one or two months each year.
  • Take advantage of gifts, inheritances, and windfalls.
the value of long term investing programs
The Value of Long-Term Investing Programs
  • Many people don’t start investing because they only have a small amount to invest,but....
  • Even small amounts invested regularly grow over a long period of time.
  • If you save $2,000 each year at 5%, you would have $241,600 at the end of 40 years. The higher the rate of return the greater the risk.
factors affecting the choice of investments
Factors Affecting the Choice of Investments
  • Safety and risk.
    • Safety in any investment means minimal risk of loss.
    • Risk means a measure of uncertainty about the outcome.
    • Investments range from very safe to very risky.
    • The potential return on any investment should be directly related to the risk the investor assumes.
    • Speculative investments are high risk.
five components of the risk factor
Five Components of the Risk Factor
  • Inflation risk - during periods of high inflation your investment return may not keep pace with the inflation rate.
  • Interest rate risk - you may invest in a bond at a 6%, rates later go up to 8%; your bond price is no longer getting the best rate available.
  • Business failure risk - bad management or products affect stocks and corporate bonds.
  • Market risk - prices fluctuate because of behaviors of investors.
  • Global investment risk - changes in currency affect the return on your investment.
investment income
Investment Income
  • Safest investments – predictable income.
    • Savings accounts and certificates of deposit.
    • Canada savings bonds (CSB).
    • Canadian treasury bills (T-bills).
  • Higher potential income investments include…
    • Municipal bonds.
    • Corporate bonds.
    • Preferred stocks and income common stocks.
    • Income mutual funds.
    • Real estate rental property.
  • Why are the investments in the second category likely to bring better investment returns?
investment growth and liquidity
Investment Growth and Liquidity
  • Growth means investment will increase in value.
    • Common stock.
    • Growth companies pay little or no dividends, but reinvest in the company
    • Mutual funds-real estate offer growth potential.
    • Gemstones and collectibles are more speculative.
  • The investment grows in value but does not pay dividends (income) to you. How do you realize your profit so that you can use it to pay your bills (food, housing, new car, etc)?
  • Liquidity.
    • Ability to buy or sell an investment quickly without substantially affecting the investment’s value.
    • e.g. Real estate is not a very liquid investment.
asset allocation and diversification
Asset Allocation and Diversification
  • Asset allocation is the process of spreading your assets among several different types of investments, usually by percentage, to lessen risk.

What is meant by spreading your investments out by percentage?

  • Determine what percent you want in stock, bonds, CDs, and mutual funds based on your time frame, age, and tolerance for risk.
  • Investing in different asset classes provides diversification.
  • Younger investors generally should put a larger percentage in growth-oriented investments.
investment alternatives stock
Investment Alternatives - Stock

Stock or equity financing.

  • Equity capital is provided by stockholders, who buy shares of a company’s stock.
  • Stockholders are owners and share in the success of the company.
  • A corporation is not required to repay the money obtained from the sale of stock.
  • They are under no legal obligation to pay dividends to stockholders. They may instead retain all or part of earnings.

If you are a stockholder, how do you get your profit, and if you want your equity capital investment to use for another purpose, how do you get it?

investment alternatives bonds
Investment Alternatives - Bonds
  • Corporate and government bonds.
  • A bond is a loan to a corporation, the federal government, or a municipality.
  • Bondholders receive periodic interest payments, and the principal is repaid at maturity (1-30 years).
  • Bondholders can keep the bond until maturity or sell it to another investor before maturity.

What is the difference between the way that you get your profit from a stock and from a bond?

investment alternatives mutual funds
Investment Alternatives – Mutual Funds

Mutual funds

  • Investors’ money is pooled and invested by a professional fund manager.
  • You buy shares in the fund.
  • Provides diversification to reduce risk .
  • Funds range from conservative (safe) to extremely speculative (risky).
  • Match your needs with a fund’s objective.

How do you match your personal investing needs with a fund’s objectives?

investment alternatives real estate
Investment Alternatives - Real Estate
  • The goal of a real estate investment is to buy a property and sell it at a profit. Nationally, 3% appreciation in price a year is average.
  • Location, location, location.

Question. Why is location important?

investment alternatives real estate1
Investment Alternatives - Real Estate
  • Before you buy real estate...
  • Is the property priced competitively?
  • What type of financing is available, if any?
  • How much are the taxes?
  • What is the condition of the buildings and houses in the immediate area?
  • Why are the present owners selling?
  • Could the property decrease in value?

In class exercise. Discuss this question with people sitting near you and write your answer down. Be prepared to tell the class your answer.

You have money to invest and believe that investing in real estate is a good idea.

Choose either,

  • Restaurant
  • Retail store
  • Office building

Answer these questions.

  • Which type of property did you choose?
  • Where would you purchase the property?
  • Why did you choose that location?
  • Did you pay more or less than the other options?
  • Who will manage the property?
  • What are 5 questions that you will need to have answered before making the decision as to whether physical asset (building) is worth the investment?
  • What are 5 questions that you will need to have answered before making the decision as to whether you will find someone to rent it from you, at a price that will earn you more profit than if you invest your money in a bond?
investment alternatives other
Investment Alternatives - Other

Speculative investments.

  • A speculative investment is a high-risk investment made in the hope of earning a relatively large profit in a short time. Typical speculative investments include:
  • Antiques and collectibles.
  • Options.
  • Commodities.
  • Coins and stamps.
  • Precious metals and gemstones.
a personal investment plan
A Personal Investment Plan
  • Establish realistic goals.
    • What are they?
  • Determine the amount of money needed to meet your goals.
    • How will you determine this and how will you know if your goal is realistic?
  • Specify the amount of money available to fund your investments.
  • List different investments you want to evaluate.
  • Evaluate risk and potential return for each.
  • Reduce possible investments to a reasonable number.
  • Choose at least two different investments.
  • Continue to evaluate your investment program.
your role in the investment process
Your Role in the Investment Process
  • Evaluate potential investments.
  • Seek the assistance of a financial planner.
  • Monitor the value of your investments frequently.
  • Keep accurate and current records to make it easier to track increases and decreases from the date you purchased the investment.
  • Consider the tax consequences of selling your investments.
sources of investment information
Sources of Investment Information
  • The internet. A wealth of investment information is available.
    • View sites such as www.scotiamcleod.cawww.cibcinvestments.cawww.fool.com, www.cnn.comwww.money.com
  • Newspapers and news programs.
  • Business periodicals such as Smart Money and government publications.
  • Corporate Reports.
  • Investor services and newsletters.
investing in securities
Investing in Securities
  • Securities include a broad range of investments.
    • Stocks.
    • Bonds.
    • Mutual funds.
    • Options.
    • Commodities.
  • The focus in this chapter is on investing in stocks.
beginning to invest in stocks
Beginning to Invest in Stocks
  • Good investors do a lot of research about the target company before they invest in its stock.
  • Learn what the information you gather means.
    • Are sales increasing?
    • Are revenues increasing over time?
    • Are earnings per share increasing over time?
    • Does the company have a strong research and development program?
    • Does the company have the confidence of their public and goodwill of existing clients and customers?
  • There are periods where stocks decline in value. Can you hold your emotions intact for the emotional ride?
  • The key to success is to allow investments to work for you over the long-term.

Why Corporations Issue

Common Stock

  • To raise money to expand a business.
  • They don’t have to repay the money a stockholder pays for stock.
  • Dividends are not mandatory. Most corporations distribute 30-70% of their earnings to stockholders.
  • In return for investing in the company, stockholders have voting rights.
why do investors purchase common stock
Why Do Investors Purchase Common Stock?
  • They can make money in three ways.
    • Income from dividends in the form of cash or additional stock.
    • Dollar appreciation of stock value.
    • Possible increased value from stock splits.
when should you sell a stock
When Should You Sell a Stock?
  • Follow the value of the stock. Do you have a certain price at which you will sell?
  • Watch the company’s financials - are profits going up or down? If their profits are well below the industry average it may be time to sell.
  • Track the firm’s product line. Are they state-of-the-art or becoming obsolete?
  • Monitor economic developments. For example, will people buy cars if interest rates or unemployment rates are high?
  • Be patient. Allow time for a good stock to increase in value before you sell.
preferred stock
Preferred Stock
  • Investors in preferred stock receive cash dividends before common stock holders are paid any cash dividends.
  • The dividend amount is either a stated amount of money for each share of preferred stock, or a percentage of the par value.
  • Par value is an assigned dollar value that is printed on a stock certificate.
  • You are an owner of the stock but have a known rate of return. Shares are safer than common stock because the dividends are more secure.
features of preferred stock
Features of Preferred Stock

Cumulative feature.

  • Unpaid cash dividends accumulate and must be paid before any cash dividends are paid to the common stock holders.

Conversion feature.

  • Can be traded for shares of common stock in the same company.
classification of stock investments
Classification of Stock Investments

Blue chip stock.

  • Generally attracts conservative investors.
  • Strongest and most respected companies, such as Kellogg or General Electric.

Income stock.

  • Pays higher than average dividends from a steady source of income, such as a utility stock.
classification of stock investments1
Classification of Stock Investments

Growth stocks.

  • Earn profits above the average profits of all firms in the economy.
  • Should have expanding product lines, research and development to develop new products.
  • Are their facilities state-of-the-art, and are they expanding into international markets?
  • Less than 30% of profits are paid out as dividends, with rest reinvested in the company. Stock value, and price, should go up.
classification of stock investments2
Classification of Stock Investments

Cyclical stock.

  • Follows the business cycle of advances and declines in the economy.
  • ex. automobiles, heavy manufacturing, paper, and steel.

Defensive stock.

  • Remains stable during declines in the economy, and have a history of stable earnings. Kellogg, Procter and Gamble, and utility stocks are examples.
classification of stock investments3
Classification of Stock Investments
  • Large cap stocks
    • Issued by a corporation that has a large amount of stock outstanding and a large amount of capitalization (5 billion +).
  • Mid cap stocks
    • Issued by a corporation that has capitalization between $1 billion and $5 billion.
  • Small cap stocks.
    • Company has capitalization of $500 million or less.
  • Penny stocks
    • New or erratic companies whose stock typically sells for less than $1 per share. Speculative.
internet stock information
Internet Stock Information
  • A Company’s home page has more up-to-date information than their printed materials.
    • Annual report, earnings, and other financial factors.
  • http://finance.yahoo.com allows you to conduct research on a company, and provides a stock screener to help you choose investments.
  • www.standardpoor.com
  • www.morningstar.com
  • www.valueline.com
stock advisory services
Stock Advisory Services
  • Prepare printed materials that are a good supplement to information in newspapers and the Internet.
  • Charge a fee.
  • Hundreds to choose from.
    • Standard and Poor’s reports.
    • Value Line.
    • Mergent’s Handbook of Common Stock.
  • As an investor, your job is to interpret the information provided.
how to read the newspaper financial section
How to Read the Newspaper Financial Section
  • You will see stock quotes in newspapers such as The Wall Street Journal.
  • 52 week high and low price.
  • The name of the company, and ticker symbol.
  • Projected annual dividend and yield percentage.
  • Price-earnings ratio.
  • Number of shares traded during the day.
  • The high and low price of the day.
  • The price paid in the close transaction of the day.
  • The net change from the day before.
numeric measures that influence investment
Numeric Measures That Influence Investment
  • Corporate earnings play a large part in the increase or decrease in value of a stock.

Why do earnings have so much to do with the value/price of a stock?

  • Earnings per share are the corporation’s after-tax earnings divided by the number of outstanding shares of common stock. An increase in earnings is generally a healthy sign.
  • Price-earnings (PE) ratio.
    • Price of one share of stock divided by the earnings per share of stock over the last 12 months.
numeric values that influence investment
Numeric Values That Influence Investment
  • PEG ratio = Price-earnings ratio/Annual EPS growth
  • Dividend payout = Dividend amount/EPS
  • Total return = Current return + Capital gain
  • Annualized holding period gain = Total return/Original investment X 1/Number of years investment is held.
numeric measures that influence investment1
Numeric Measures That Influence Investment
  • The current yield helps you monitor the value of your investments. It is the yearly dollar amount of income generated by an investment divided by the investment’s current market value. An increase in current yield is considered good.
  • Beta is a measurement of risk. The beta for S & P 500 stock index is 1.0. Conservative stocks generally have low betas and speculative stocks have high betas. If a stock has a beta of two, its price will move twice as fast as the market in either direction.
numeric measures that influence investment2
Numeric Measures That Influence Investment
  • Book value per share.
    • Net worth of company determined by deducting all liabilities from the corporations assets and dividing the remainder by the number of outstanding shares of common stock.
    • If a share costs more than the book value the company may be overextended or it may have a lot of money in research and development.
investment theories
Investment Theories

Fundamental analysis.

  • Based on the assumption that a stock’s intrinsic or real value is determined by the company’s future earnings.
  • Fundamentalists consider the…
    • Financial strength of the company.
    • Type of industry company is in.
    • New-product development.
    • Economic growth of the overall economy.
investment theories1
Investment Theories

Technical analysis

  • Based on the assumption that a stock’s value is determined by the forces of supply and demand in the stock market as a whole.
  • Not based on expected earnings or the intrinsic value of a stock but rather on factors found in the market as a whole.
  • Chartists plot past price movements and other market averages to observe trends they use to predict a stock’s future value.
investment theories2
Investment Theories

Efficient market theory.

  • Sometimes called the random walk theory.
  • Based on the assumption that stock price movements are purely random.
  • A stock’s current market price reflects its true value.
  • It is impossible for an investor to outperform the average for the stock market as a whole over a period of time.
  • Wall Street Journal’s “darts vs. the experts” finds sometimes experts win, sometimes not.
buying and selling stocks
Buying and Selling Stocks

Primary market.

  • A market in which an investor purchases financial securities through an investment bank, or other representative, from the issuer of those securities.
  • An investment bank is a financial firm that assists corporations in raising funds, usually by helping to sell new security issues.
  • An IPO occurs when a corporation sells stock to the general public for the first time.

Secondary market.

  • A market for existing financial securities that are currently traded among investors through brokers.
securities exchanges
Securities Exchanges
  • A marketplace where member brokers who represent investors, meet to buy and sell securities.
  • The securities sold at an exchange must be listed, or accepted for trading, at the exchange.
  • New York Stock and American Exchanges.
  • The Over-the-Counter (OTC) market.
    • Network of dealers who buy and sell the stocks of companies not listed on a securities exchange.
    • Most OTC securities are traded over the NASDAQ which is an electronic marketplace for approximately 3,300 stocks.
brokerage firms and account executives
Brokerage Firms and Account Executives
  • An account executive, or stockbroker, is a licensed individual who buys and sells securities for his or her clients.
  • Churning.
    • Excessive buying and selling of securities to generate commissions.
  • Discount broker versus full service brokers.
    • How much advice do you want?
    • Nearest office and toll-free phone number?
    • Online and phone trading services and costs?
    • Fees, charges and commissions?
stock transactions
Stock Transactions
  • Market order: Request to buy or sell stock at the current market value.
  • Limit order: Request to buy or sell a stock at a specified price.
  • Stop order: Request to sell a stock at the next available opportunity after its market price reaches a specified amount.
  • Discretionary order: Account executive decides when to execute the transaction and at what price.
stock transactions1
Stock Transactions
  • Transactions done on phone or online.
  • Brokerage firms have minimum commissions for trading stock, from $7 to $55, depending of the number of shares sold and the value of the stock.
  • Full-service broker would typically charge about $150 on a transaction, discount brokers $55 to $85.
  • Full service and discount brokers charge more than online brokerage transactions, but you make your own decisions in trading online.
who regulates the securities markets
Who Regulates the Securities Markets?
  • The Canadian Parliament
  • Securities and Exchange Commission
    • Registers securities (stocks and bonds).
    • Licenses brokers.
    • Prosecutes for stock fraud and insider trading.
  • Individual States
  • NYSE, Other Self-Regulatory OrganizationsBrokerage Firms
homework online activity
Homework – Online Activity
  • Go to an online source such as www.fool.com, www.morningstar.com, or www.cnnfn.com. Research some stocks and find one that you feel would be a good investment.
  • Why do you feel that this stock would be a good investment for you?
long term and short term investment strategies
Long-Term and Short-Term Investment Strategies

Long-term techniques.

  • Buy and hold.
  • Dollar cost averaging.
  • Direct investment and dividend re-investment plans. (DRIPS)

Short-term techniques.

  • Buying stock on margin (borrowing money).
  • Selling short (borrowing stock).
  • Trading in options (predetermined price).
  • Day trading
lesson 24 chapter 16 fin 403 investing in mutual funds

Explain this cartoon.

For example, it went from $100 to $2 which is 98% down, but then it climbed to 4 which is a 100% increase.

What statistics could be used to analyze this?

Lesson 24 Chapter 16 FIN 403Investing in Mutual Funds

what is a mutual fund
What is a Mutual Fund?
  • An investment alternative where money from investors is pooled to buy stocks, bonds, and other financial securities selected by professional managers.
  • Many people choose mutual funds for their retirement account investments. They can be purchased from many different companies and salespeople.
mutual fund statistics
Mutual Fund Statistics


  • 92 million individuals in the U.S. own mutual funds.
  • Over $8 trillion in assets owned by mutual funds in the U.S. by 2004.


  • The mutual fund industry went from 25 billion in 1990 to a whopping amount of 705 billion in 2008.
  • 50 thousand mutual fund account holders.
why investors purchase mutual funds
Why Investors Purchase Mutual Funds
  • Professional management.
    • Who is the fund’s manager?
    • Managers can change.
    • Be aware of the scandal involving late trading.
  • Diversification.
    • Investors funds are used to purchase a variety of investments. This variety provides some safety.
closed and open end funds
Closed- and Open-End Funds
  • Closed-end funds (7% of funds).
    • Shares are issued by an investment company only when the fund is organized.
    • After all original shares are sold you can purchase shares only from another investor who is willing to sell.
    • Traded on exchanges and over-the-counter.
  • Open-end funds (91% of funds).
    • Shares are issued and redeemed by the investment company at the request of investors.
    • Investors can buy and sell shares at the net asset value (NAV).
exchange traded funds
Exchange-Traded Funds
  • Invests in the stocks contained in a specific stock market index, like the Standard and Poor’s 500 stock index.
  • Performance of shares in the fund tend to mirror the performance of the index.
  • Low management fees since there is less need for decisions made by a portfolio manager.

Homework Question. Research the S&P 500 and tell explain to the class, what it is.

net asset value nav
Net Asset Value (NAV)

Value of the fund’s portfolio – Liabilities

Number of shares outstanding

For most mutual funds, NAV is calculated at the close of trading each day.

load funds and no load funds
Load Funds and No-Load Funds

Load Fund.

  • Investors pay a commission (sales charge) up to 8.5% every time they purchase shares. This is sometimes called a front load. (Class A shares)
  • Average charge is 3-5% for which an investor can get purchase advice and explanations.

No-Load Fund.

  • Investors pay no sales charge up front.
  • You deal directly with the fund with 800 numbers or web sites, or from discount brokers.
management fees and other charges
Management Fees and Other Charges

Contingent deferred sales load (back-end load) (Class B shares).

  • Charged upon withdrawal of funds (1-5%).
  • Generally decreases on a sliding scale depending on the number of years shares are held.

Management fee.

  • Charged yearly (.5%-1.25% average) based on a percentage of the funds asset value.

12b-1 fees (Class C shares).

  • Annual fee to defray advertising and marketing costs of the fund.
  • 1% or less of a fund’s assets per year.

Who is making the money here?

number of mutual funds by type
Number of Mutual Funds by Type*

*Source: Year 2000 data from the U.S. Bureau of the Census, Statistical Abstract of the United States, 2001, page 744.

classification of mutual funds
Classification of Mutual Funds
  • Stock funds.
    • Aggressive growth mutual funds buy stocks in small, fast-growing companies.
    • Equity income mutual funds invest in stock of companies with a long history of paying dividends.
    • Growth Income mutual funds buy stock in companies with higher-than-average revenue and earnings growth.
    • Global funds buy stock in companies in your home country and in other countries, while international funds buy stock only in companies outside of your home country.
    • Index buys stocks that mirror an index.
    • Large-cap funds invest in companies with capitalization of $5 billion or more.
    • Mid-cap funds buy stock in companies whose capitalization is between $1 and $5 billion.
classification of mutual funds1
Classification of Mutual Funds
  • Regional funds buy stock in companies in a specific region of the world.
  • Sector funds buy stock in companies in a particular industry such as biotechnology.
  • Small-cap funds buy stock in lesser-known companies with a capitalization of less than 500 million.
  • Socially responsible funds avoid investing in companies that produce harmful products.
classification of mutual funds2
Classification of Mutual Funds
  • Bond funds.
    • High-yield (junk) bond funds buy corporate bonds that are higher risk and higher yield.
    • Index bond funds invest in a sampling of bonds included in an index.
    • Intermediate corporate bonds (5-10 years).
    • Intermediate U.S. bond funds buy treasury notes with maturities of 5-10 years.
    • Long-term corporate bonds (> 10 years).

Discussion: what are the advantages and disadvantages of some of these investment strategies?

classification of mutual funds3
Classification of Mutual Funds

Other funds.

  • Asset allocation funds: invest in various asset classes, such as stocks, and bonds, with precise amounts within each type.
  • Balanced funds: Invest in both stocks and bonds, with the primary objectives of conserving principal, providing income as well as growth.
  • Money market funds: Invest in CD’s, government securities, and other safe investments.
families of funds
Families of Funds
  • A family of funds exists when one investment company manages a group of mutual funds.
  • Each fund in the family has a different financial objective.
  • Exchange privileges allow you to move your money from one fund to another within the fund family with little or no charge.
steps to evaluate mutual funds
Steps to Evaluate Mutual Funds
  • Are you ready to invest in mutual funds?
  • Determine your risk tolerance.
  • Determine your investment objectives.
  • Obtain the money you need invest.
  • A fund’s objective should match your investment objective.
  • Evaluate any mutual fund before buying or selling (www.morningstar.com)
  • Consider managed funds vs. indexed funds (the difference between the two is…)
internet sources of fund information
Internet Sources of Fund Information
  • Use web sites to research a fund.
    • http://finance.yahoo.com
    • www.businessweek.com
    • www.morningstar.com (also other advisory services, such as Value Line).
    • www.smartmoney.com
  • Check mutual fund companies Internet sites.
    • www.trendstarfunds.com
    • www.vanguard.com
reading a mutual fund quote in the newspaper
Reading a Mutual Fund Quote in the Newspaper
  • Net asset value and asset value change.
  • The fund family and fund name.
  • Fund objective.
  • Total return over various time periods.
  • Ranking among funds with the same objective.
  • Sales load fees if any, or no load (NL).
  • Annual expenses.
other sources of fund information
Other Sources of Fund Information

Mutual fund prospectus tells the funds objective and:

  • A statement describing the risk factors.
  • A description of the fund’s past performance.
  • A statement describing the type of investments in the fund’s portfolio.
  • Information on how to open an account.
  • Dividends, distributions and taxes.
  • Information about the fund’s management.
  • The process for investors to buy or sell shares.
  • Services provided to investors.
  • The turnover ratio of the fund’s investments.
other sources of fund information1
Other Sources of Fund Information

Mutual fund annual report.

  • Performance, investments, assets and liabilities.

Financial Publications.

  • Business Week, Forbes, Kiplinger'sPersonalFinance and Money are sources of information.
  • Business Week’s mutual fund survey includes information such as the...
    • Fund’s overall rating compared to all other funds, and to funds in the same category.
    • Fund size, sales charge and expense ratio.
    • Performance for best and worst quarters.
mutual fund transactions
Mutual Fund Transactions
  • You can open an account from $250 to $3,000 and up depending on the fund & family.
  • Open-end, no-load directly from the investment company by phone, mail, online, or from a discount broker.
  • Closed-end or exchange-traded funds are purchased through a broker; traded on stock exchanges and over-the-counter.
mutual fund transactions1
Mutual Fund Transactions

There are several ways you can get a return on your investment.

  • Capital gains: sell shares at a price > than you paid.
  • Income dividends: earnings funds pay to shareholders from dividend and interest income (Taxed as regular income).
  • Capital gain distributions: Payments to shareholders from sale of securities held by the fund.
  • Income and capital gain distributions can be automatically reinvested.
mutual fund features
Mutual Fund Features
  • Automatic investments: Money is taken from your checking account monthly and invested in a fund.
  • Telephone Switching: Call your fund and move money from one fund to another in the same family.
  • Withdrawals: Various withdrawal options; you can withdraw funds by phone, letter, online, etc.
mutual fund activity
Mutual Fund Activity
  • Go online to www.morningstar.com, www.cbsmarketwatch.com or other sources and do some research on mutual funds.
  • Find a fund that you feel would be a good investment for you.
  • HOMEWORK: In a group of 3, discuss your investing objectives, select a mutual fund and discuss how this fund will meet those objectives.