Indexes Mutual Funds

Stock Market Index  A method of measuring the value of a section of the stock market  Computed from the prices of selected stocks  Describes the market and compares the return on specific investments

S & P 500 Index  Standard & Poor’s 500  Standard and Poor are the last names of the two men that founded the index  Companies included in the index are selected by the S & P Index Committee  Companies included in the index trade common stock on the NYSE

S & P 500 Index  Top 500 companies  Chosen for their market size, liquidity and industry grouping  Liquidity-The degree to which a stock can be sold without affecting the price  Characterized by high level of trading activity  Assets that can be easily bought or sold are considered liquid assets

S & P 500 Index, In a Nutshell  Essentially, the S & P 500 is a report  From this report, you can see how the top 500 companies are doing on the stock market and what their market value is  This helps you decide if the stock you are considering purchasing is a good investment  Just because the company is not on the list does not mean their stock is not a good investment

Examples  Some companies currently listed on the S & P 500:  Abercrombie & Fitch (ANF)  Pepsi Co. (PEP)  Mastercard, Inc. (MA)  Wells Fargo (WFC)  Google (GOOG)

Dow Jones Industrial Average  an index that shows how 30 large publicly owned companies based in the United States have traded during a standard trading session in the stock market  Founded by Charles Dow and Edward Jones  Lists stocks traded on both the NYSE and NASDAQ

Dow Jones Industrial Average  Often referred to as “The Dow”  Basically a market report, just like the S & P 500

Portfolio  A grouping of financial assets such as stocks, bonds & mutual funds  If you have investments, they are grouped in your portfolio

Bonds  A debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate.  Bonds are used by companies, municipalities, states and U.S. and foreign governments to finance a variety of projects and activities.

Mutual Funds  A type of investment made up money from many investors for the purpose of investing in a variety of different types of securities at once  There are more than 17,000 mutual funds to choose from

Open-Ended Funds  Sell as many shares as investors want to buy  They will only stop selling shares if the fund grows too large  If you want to sell your shares, you sell them back to the fund

Closed-End funds  Only a fixed number of shares are sold on the stock exchange  Once all the shares are sold, no others can be bought

Exchange-Traded funds  This type of fund invests in stocks that closely follow an index

Making Money on Mutual Funds  Just like stocks, Mutual Funds grow in value and are paid dividends  The managers of the fund sell the securities at a profit and distribute the money to fund holders

Variety  You can invest in many types of mutual funds  Some funds have a purpose  A number of funds have been created to support ideas or causes

Special Mutual Funds  Some funds support particular causes such as:  Women’s Issues  Companies with socially responsible business practices  Family friendly companies

Mutual Fund Families  A group of funds offered by the same investment company  A fund family can use different distributors for different funds  The family of funds will often include many different types of securities

Diversification  A risk management technique that mixes a wide variety of investments within a portfolio  Mutual funds are a great investment because they offer diversification  The goal of diversification is to try to balance underperforming stocks with stocks that are doing well

Ticker Symbols  Five letters long  End in an “X”

Morningstar  An investment research firm that compiles mutual, stock and general market data  Respected and reliable source of investment analysis

Risk Rating  Morningstar rates mutual funds according to their level of risk  Rankings are from 1-5  1 is the poorest and 5 is the best  Ratings are designed to quickly identify funds to consider purchasing

YTD Return  Year to date (YTD)  The period beginning January 1of the current year up until today’s date  The percentage of profit an ivestment is making so far this year

NAV  Net Asset Value  The price at which investors buy and sell from a fund company