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Day 40 ……..3/26

Day 40 ……..3/26. What risk is involved in the short-sale of stock?. Mutual Funds. A collection of shareholders money invested in an assortment of different securities. NAV – Net Asset Value Price of a mutual fund’s shares Value of funds investment portfolio - liabilities

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Day 40 ……..3/26

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  1. Day 40……..3/26

    What risk is involved in the short-sale of stock?
  2. Mutual Funds A collection of shareholders money invested in an assortment of different securities. NAV – Net Asset Value Price of a mutual fund’s shares Value of funds investment portfolio - liabilities ÷outstanding shares
  3. Example: total investment portfolios = 50 million liabilities = 5 million outstanding shares = 9 million 50m – 5m = $5/share 9m calculated everyday mutual fund shares may only be traded once day
  4. Advantages Diversification Access to professional money management Convenient (easy to trade, access to $) Minimal risk (little to no risk of bankruptcy) Disadvantages Cost money to manage Pay taxes on gains
  5. Types of Mutual Funds Open-end no limit on the amount of shares a fund can issue Close-end # of shares determined before its established Once sold, the only way to acquire is from an investor who is ready to sell. the preferred funds (less expensive, easy to trade)
  6. Stock Funds (equity funds) Most popular Invest in stocks diversification lessons risks Types of Stock Funds Growth – short-term appreciation Value – conservative, avoid risk Blend – growth & value Sector – industry specific (oil, technology) International – higher risk due to currency fluctuation
  7. Bond Funds can provide steady stream of income funds continuously maturing Mature Categories Short-term = within a year Intermediate = 1-10 years Long-term = 10-30 years Balanced Funds (hybrid funds) stock growth and bond income not as high a return as stock funds, but safer
  8. Money market Funds (money funds) very conservative short-term goals, can’t afford much risk Index Funds copy performance of stock market index S&P 500 / Nasdaq 100 same funds at same percent may select sector index cheaper to mange reliable performance of stock indices
  9. 1. What is Socially Responsible Investing What fund would you invest in – specifically What is Community Investing?
  10. Exchange Traded Funds “cousins” of mutual fund – trade like stock Similar to Index Funds S&P 500 Depository Receipt /SPDR (spider) Nasdaq 100 Trust / QQQ (cubes) Advantages over traditional funds cheaper to manage (passive mgr.) trade all day long
  11. Where to trade? investment company (Fidelity, T, Rowe Price, Vanguard) Where NOT to trade? bank reps, insurance agents, financial planners “push” certain funds high commission
  12. Costs Managed by a full-time staff Purchase directly from investment company Look for low managerial fees Expense ratios of 1.5% or less Buying/Selling Phone (800# in paper: request prospectus/application) Web (www.troweprice.com)
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