1. Oklahoma Securities Commission
MUTUAL FUNDS and ETFs
by Matt Ingram
Invest Ed®
All Rights Reserved
Oklahoma Securities Commission
June 2017

2. What is a Mutual Fund?
an investment portfolio that invests its shareholders’ money in a portfolio of securities
More mutual funds exist today than stocks listed on the NYSE.
Almost half of U.S. households own mutual funds (and most of those are in retirement accounts like 401(k) or IRAs).
Over $6 Trillion in assets

3. Advantages of Owning Diversification Professional management
Ability to invest in small amounts
Automatic investing and withdrawals
Convenience and Liquidity
Fund families
Please mention documentary: Retirement Gamble.

4. Drawbacks to Owning Mutual Funds
Transaction costs: management fees, loads, 12b-1 fees (Where can I find these?)
Professional management can change.
75% of managed funds do not beat “the market.”
Hidden use of leverage
Sometimes funds close—then what?

5. Fund Topics Actively Managed Index Sector Funds Asset Class
Load/No-load

6. Load vs. No-Load Funds
A “load” fund charges a commission upfront to pay the broker who sold you the fund.
There are front-load and back-load funds.
No-load funds = no sales commissions
These funds are cheaper and sold directly by the fund company to customers.
If performance is equal, why pay commissions?

7. Mutual Fund Fees Of course no-load fund companies don’t work for free!
Both kinds of funds (load, no-load) charge fees.
12(b)-1 fee covers operating costs of fund company (usually less than 1%)
Management fee is usually a percentage of total funds under management. (around 1%)
You can shop around for the best (lowest) fees.

8. Example of a Mutual Fund
Fidelity Contra
FCNTX
Fund information and prospectus
Holdings
Risk
Performance

9. Exchange Traded Funds (ETFs)
A basket of securities designed to track a specific market index
Similar to index mutual funds
Trades on an exchange (like a closed-end fund)
Low management expenses and turnover
Famous ETFs: SPY, QQQQ, DIA
Use of leverage and access to alternative investments

10. Example of ETFs SPY (S&P 500 Index) GLD (gold)
TLT (long term government bonds)
XLF (financial sector)