1. Personal Finance Garman/Forgue Ninth Edition
Chapter 15: Investing Through Mutual Funds
PPT slide program prepared by Amy Forgue and Ray Forgue.

2. Learning Objectives
Describe the features, services, and advantages of investing in mutual funds.
Differentiate mutual funds by investment objectives, types, and characteristics.
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3. Learning Objectives
Summarize the fees and charges involved in buying and selling mutual funds.
Establish strategies to evaluate and select mutual funds that meet your investment goals.
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4. Why Invest in Mutual Funds?
Net Asset Value (or NAV): Per-share value of a mutual fund.
Dividend income and capital gains
Ordinary income dividend distributions
Capital gains distributions
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5. Advantages of Investing Through Mutual Funds
Diversification
Random (or nonsystematic) risk
Affordability
Professional management
Fund investment advisers
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6. Advantages of Investing Through Mutual Funds
Liquidity
Low transaction costs
Uncomplicated investment choices
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7. Mutual Fund Disadvantages
Performance is often lower than the market.
Diversification may not really exist.
Costs can be high.
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8. Unique Mutual Fund Services
Convenience
Ease of buying and selling shares
Check writing and electronic transfers
Distribution of or automatic reinvestment of income and capital
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9. Unique Mutual Fund Services
Telephone and internet exchange privileges
Exchange (or switching, conversion, or transfer) privilege
Beneficiary designation
Automatic investment
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10. Unique Mutual Fund Services
Effortless establishment of retirement plans
Multiple income withdrawal options (or systematic withdrawal plans)
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11. Types of Investment Companies
Closed-End Mutual Fund
Real Estate Investment Trust (or REIT)
Unit Investment Trust (or UIT)
Exchange-Traded Fund (or ETF)
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12. Fund Objectives, Types, and Characteristics
Managed Funds
Income Objective
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13. Fund Objectives, Types, and Characteristics
Money Market Funds
Tax-exempt money market funds
Government securities money market funds
Bond funds
Bond (or fixed-income) funds
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14. Fund Objectives, Types, and Characteristics
Growth objective
Aggressive growth (or maximum capital gains) funds
Growth funds
Growth and income funds
Value funds
Sector funds
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15. Fund Objectives, Types, and Characteristics
Index Funds: These funds are unmanaged.
Growth and income objective
Growth and income funds
Equity-income funds
Socially conscious funds
Asset allocation funds
Life-cycle funds
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16. Fees and Charges of Mutual Fund Investing
Shareholder Fees
Annual Fund Operating Expenses
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17. Load and No-Load Funds Load funds always charge transaction fees.
Front-end load
Stated commission
Percentage of the amount invested
Some no-load mutual funds assess 12b-1 fees.
12b-1 (or distribution) fee
Trailing commissions
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18. Load and No-Load Funds
Some no-load funds assess deferred load and redemption fees.
Deferred (or back-end) load
Redemption charge (or exit fee)
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19. Fees and Charges of Mutual Fund Investing
Disclosure of fees in standardized expense table
What’s best: load or no load? Low fee or high fee?
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20. Selecting Funds in Which to Invest
Review your investment philosophy and investment goals.
Eliminate funds inappropriate for your investment goals.
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21. Selecting Funds in Which to Invest
Screen and compare funds that meet your investment criteria.
Fund screener (or fund screening tool)
Profile prospectus (or fund profile)
Monitor your mutual fund portfolio.
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22. Selecting Funds in Which to Invest
Use portfolio monitoring on the ‘Net.
Check fund quotations in newspapers.
Mutual fund bid price
Mutual fund ask price
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23. The Top 3 Financial Missteps In Mutual Fund Investing
People slip up in mutual fund investing when they do the following:
1. Buy funds with high fees and expenses.
2. Withdraw dividends rather than reinvesting.
3. Chase performance by investing in “hot” funds.
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24. Good Money Habits in Mutual Funds
Match your investment philosophy and financial goals to a mutual fund’s objectives.
Invest only in no-load mutual funds that have low expenses and have no or a low 12b-1 fee.
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25. Good Money Habits in Mutual Funds
Get the right mix of asset classes in your long-term fund investments and learn to love consistency.
Sign up for automatic reinvestment of your mutual fund dividends.
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26. Good Money Habits in Mutual Funds
Invest regularly through your employer’s retirement plan.
Rebalance your portfolio at least once a year and dump the slackers.
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