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Chapter © 2010 South-Western, Cengage Learning Investing in Mutual Funds, Real Estate, and Other Choices 14.1 14.1Investing in Mutual Funds 14
© 2010 South-Western, Cengage Learning The Standards Standard 4.0 Investigate opportunities available for saving and investing. 4.3Evaluate methods of investing. b.Mutual funds SLIDE 2 Chapter 14
© 2010 South-Western, Cengage Learning SLIDE 3 Chapter 14 Lesson 14.1 Investing in Mutual Funds GOALS Discuss mutual funds as an investment strategy. Explain how to buy and sell mutual funds.
© 2010 South-Western, Cengage Learning Rule of 72 How many years will it take to double your money? 72 / interest rate = years to double Ex. $5,000 investment at 6% 72 / 6 = 12 yrs. SLIDE 4 Chapter 14
© 2010 South-Western, Cengage Learning SLIDE 5 Chapter 14 Evaluating Mutual Funds A mutual fund is a professionally managed group of investments bought using a pool of money from many investors. Individuals buy shares in the mutual fund. The fund managers use this pooled money to buy stocks, bonds, and other securities. The kinds of securities they buy depend on the fund’s stated investment objectives.
© 2010 South-Western, Cengage Learning SLIDE 6 Chapter 14 Advantages of Mutual Funds Professionally managed Liquid Diversified Require only a small minimum investment 500-3000 initial 50-100 monthly
© 2010 South-Western, Cengage Learning SLIDE 7 Chapter 14 Mutual Fund Risk Growth funds Income funds Growth and income funds Money market funds Global funds Index funds
© 2010 South-Western, Cengage Learning SLIDE 8 Chapter 14 Growth Funds A growth fund is a mutual fund whose investment goal is to buy stocks that will increase in value over time. Growth stocks – reinvest dividends Can be aggressive with more risk Emerging stocks
© 2010 South-Western, Cengage Learning SLIDE 9 Chapter 14 Income Funds An income fund is a mutual fund whose investment goal is to produce current income in the form of interest or dividends. Income stocks Low to moderate risk Pays capital gain distributions
© 2010 South-Western, Cengage Learning SLIDE 10 Chapter 14 Growth and Income Funds A growth and income fund is a mutual fund whose investment goal is to earn returns from both dividends and capital gains. Moderate risk A balanced fund is a mutual fund that seeks both growth and income but attempts to minimize risk by investing in a mixture of stocks and bonds rather than stocks alone.
© 2010 South-Western, Cengage Learning SLIDE 11 Chapter 14 Money Market Funds A money market fund is a mutual fund that invests in safe, liquid securities, such as Treasury Bills and bonds that mature in less than a year. Focus on low risk Used to store money until used like a CD
© 2010 South-Western, Cengage Learning SLIDE 12 Chapter 14 Global Funds A global fund is a mutual fund that purchases international stocks and bonds as well as U.S. securities. Higher risk Political unrest Currency manipulations Some more aggressive than others
© 2010 South-Western, Cengage Learning SLIDE 13 Chapter 14 Index Funds An index fund is a mutual fund that tries to match the performance of a particular index by investing in the companies included in that index. Risk varies by index ex. Dow’s blue chip stocks An index is an average of the price movements of certain selected securities. Investors use indexes as benchmarks for comparison to judge how well their investments are doing.
© 2010 South-Western, Cengage Learning SLIDE 14 Chapter 14 Risk and Return Pyramid Money Market Funds Income Funds Growth and Income Funds Growth Funds Higher risk/higher return potential Lower risk/lower return potential
© 2010 South-Western, Cengage Learning SLIDE 15 Chapter 14 Buying And Selling Mutual Funds To choose the mutual fund that is right for you, you must know your own investment objectives and risk tolerance. Do you want income from your investments now, or can you wait for capital gains in the future? Do you need a tax-free or tax-deferred investment to reduce your current income taxes? Are you comfortable with risking your investment for a chance at big returns, or do you prefer a safe but lower return?
© 2010 South-Western, Cengage Learning SLIDE 16 Chapter 14 NAV= Value of Portfolio – Liabilities Number of Shares Net Asset Value The net asset value tells you the market price for a share of a mutual fund. The NAV is the total value of a fund’s investment portfolio minus its liabilities, divided by the number of outstanding shares. Calculated at the end of the day.
© 2010 South-Western, Cengage Learning SLIDE 17 Chapter 14 The Prospectus The prospectus is a legal document that offers securities or mutual fund shares for sale. It must contain the following: The terms Fees and expenses A summary of the fund’s portfolio of investments The fund’s objectives Financial statements showing past performance
© 2010 South-Western, Cengage Learning SLIDE 18 Chapter 14 Costs and Fees If you buy a mutual fund through a broker, you will likely have to pay a sales fee, called a load. Front-end load paid when you buy Can be on reinvestment dividends Back-end load Paid when you sell Typical range 2-8% front or back No-load fund Other fees do apply to all
© 2010 South-Western, Cengage Learning SLIDE 19 Chapter 14 The Mutual Fund Company You have no guarantees To reduce the risks It has been in business for 20 or more years It has a solid track record of returning good solid returns to investors It is a large company that manages investments for millions of investors It is a well-known company that is highly respected among investment advisers and experts It exists both in brick-and-mortar and in cyberspace It is customer friendly and responsive to customer questions and needs It provides customers with easy-to-read statements and reports and offers daily online access
© 2010 South-Western, Cengage Learning SLIDE 20 Chapter 14 Assignment Find a mutual fund traded under SMG rules for each fund type Find the NAV Find the overall rate of return Find the 1yr, 5yr and 10y rate of return
Chapter © 2010 South-Western, Cengage Learning Investing in Mutual Funds, Real Estate, and Other Choices Investing in Mutual Funds 14.
Investing in Mutual Funds Chapter 14 Goals for Chapter 14.1 Explain why people invest in mutual funds and the types of mutual funds available for investing.
LESSON 14.1 Investing in Mutual Funds. Mutual Funds What is a Mutual Fund? Professionally managed group of investments bought using a pool of money.
Chapter © 2010 South-Western, Cengage Learning Investing in Mutual Funds, Real Estate, and Other Choices Investing in Mutual Funds Investing.
Investing in Mutual Funds. What Are Mutual Funds? A mutual fund is a professionally managed group of investments using a pool of money from many investors.
1 Chapter 15 – Mutual Funds Pool money from investors with similar objectives and purchase a diversified portfolio run by a professional manager –Shares.
Mutual Funds. Objectives WHAT IS A MUTUAL FUND? HOW DO MUTUAL FUNDS OPERATE? HOW MUCH DOES MUTUAL FUND INVESTING COST? HOW SHOULD MUTUAL FUND PERFORMANCE.
2004 McGraw-Hill Ryerson Ltd. Kapoor Dlabay Hughes Ahmad Prepared by Cyndi Hornby, Fanshawe College Chapter 13 Investing in Mutual Funds 13-1.
1 Mutual Funds Diversified portfolio of stocks, bonds or other securities run by a professional manager –$ 7.9 trillion in assets; 8,300 different funds.
Chapter 15. Learning Objectives (part 1 of 3) Distinguish between the different types of investment companies. Explain the different types of fees and.
1 Investment Companies Chapter 3 Jones, Investments: Analysis and Management.
Chapter 20 Mutual Funds and Asset Allocation Lawrence J. Gitman Jeff Madura Introduction to Finance.
An Introduction to Investing Fin 302 Spring 2008 James Dow.
Lecture 18 Mutual Funds. Net Asset Value NAV = net asset value MVA = market value of assets L = funds liabilities NSO = number of shares outstanding.
Chapter 14 Investing in Mutual Funds Copyright © 2012 Pearson Canada Inc
INVESTMENTS | BODIE, KANE, MARCUS Chapter Four Mutual Funds and Other Investment Companies Copyright © 2014 McGraw-Hill Education. All rights reserved.
MUTUAL FUND Concept, Organisation Structure, Advantages and Types.
© 2013 Pearson Education, Inc. All rights reserved.15-1 Chapter 15 Mutual Funds: An Easy Way to Diversify.
13-1. McGraw-Hill/Irwin Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved. 13 Investing in Mutual Funds.
Mutual Funds Financial Literacy. 2 What We Will Cover What is a Mutual Fund? Advantages and Disadvantage of Mutual Funds Costs of Mutual Funds Types of.
What are Mutual Funds? Quick Fact: As of June 2014, an estimated 100 million individuals in 75 million U.S. households owned mutual funds.
Mutual funds have historically offered safety and diversification. And they spare you the responsibility of picking individual stocks. Ron Chernow.
Investment Companies Net Asset Value (NAV) (Total portfolio value - liabilities) / # of shares Management is usually contracted to an outside firm.
© 2008 Thomson South-Western CHAPTER 13 INVESTING IN MUTUAL FUNDS.
Copyright 2002 by Harcourt, Inc. All rights reserved. CHAPTER 13: INVESTING IN MUTUAL FUNDS Clip Art 2001 Microsoft Corporation. All rights reserved.
Types of Mutual Funds. There are Five Main Classes of Mutual Funds: money market funds income funds Equity funds balanced funds index funds.
©2007, The McGraw-Hill Companies, All Rights Reserved 17-1 McGraw-Hill/Irwin Chapter Seventeen Mutual Funds.
Prentice-Hall, Inc.1 Chapter 15 Mutual Funds: An Easy Way to Diversify.
Saving & Investing Chapter 8. Establishing your financial goals To gather funds, you need to plan carefully – and have self-discipline along the way.
CHAPTER 4: INVESTMENT COMPANIES. Definition: financial intermediaries that collect funds from individual investors and invest those funds in a potentially.
Chapter 17 Investing in Mutual Funds. Chapter Objectives Identify the types of stock funds Present the types of bond funds Explain how to choose among.
Chapter 11 Investment Companies. Closed-end Open-end (commonly called a mutual fund)
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 9 WHAT’S AHEAD 9.1Investing Basics 9.2How to Invest in Corporations 9.3How to Invest in Mutual Funds 9.4Research.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Copyright ©2004 Pearson Education, Inc. All rights reserved. Chapter 17 Investing in Mutual Funds.
Copyright © Cengage Learning. All rights reserved Traditional Investment Alternatives Portfolio management –Depends on your investment goals, tolerance.
© 2010 South-Western, Cengage Learning Chapter © 2010 South-Western, Cengage Learning Investing in Mutual Funds, Real Estate, and Other Choices 14.1Investing.
1 Mutual Funds Diversified portfolio of stocks, bonds or other securities run by a professional manager –$ 7.5 trillion in assets; 8,100+ different funds.
3-1 Chapter 3 Charles P. Jones, Investments: Analysis and Management, Tenth Edition, John Wiley & Sons Prepared by G.D. Koppenhaver, Iowa State University.
Investing Through Mutual Funds. Objectives Identify why people invest in mutual funds. Distinguish among the four major objectives of mutual funds. Classify.
Chapter © 2010 South-Western, Cengage Learning Investing for the Future Basic Investing Concepts Making Investment Choices 11.
© South-Western Educational Publishing Chapter 14 Investing in Mutual Funds, Real Estate, and Other Alternatives Investing in Mutual Funds Investing in.
13 Investing in Mutual Funds Mutual Fund = an investment vehicle offered by investment companies to those who wish to: –Pool money –Buy stocks, bonds,
CHAPTER 13: INVESTING IN MUTUAL FUNDS INVESTORS pool their money and Mutual Fund Basics.
Chapter 12 In-Class Notes. Background on Mutual Funds Advantages of Investing in Mutual Funds Diversified portfolio Professional management Marketability.
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