Stock Market Investing – Mutual Fund Unit Study Guide
What are mutual Funds?
 an assortment of ______________, _______________ and other investments
 a shareholder owns a portion of the fund’s entire _____________________ ____________________
 professional _________________ ______________________ manage the fund
 shareholders obtain a share of the profits
MUTUAL FUND PRICES AND NET ASSET VALUE (NAV)
NAV = Value of Portfolio MINUS Liabilities DIVIDED BY Number of Shares
 calculated at the end of each business day
 Unlike stocks, most mutual fund prices are not determined by what people are willing to pay for them at
a given time
WHY ARE SO MANY PEOPLE BUYING THEM?
1. __________________________________
2. Professional Fund Management
3. Convenience
It’s not unusual for mutual funds to hold stocks in over a __________________ different companies.
FAMILY OF FUNDS (Example: Fidelity)
If you own shares in a fund that belongs to a family of funds, you can transfer from one fund to another whenever
your _____________________ _______________ change.
THE MUTUAL FUND UNIVERSE
 Mutual funds have __________________ and ________________________.
 Professional fund management does not _______________________ ____________________.
GOALS AND RISK
 When selecting a mutual fund, you should:
 determine your goals
 decide the level of risk you are comfortable with
 research the ______________ ________________________ prior to investing
CATEGORIES OF MUTUAL FUNDS
 common stock funds

balanced funds (stocks and bonds)

municipal (tax exempt) bond funds

corporate bond funds

government bond funds

money market funds
IMPORTANCE OF COMMON STOCK FUNDS
Stock Market funds provide the greatest ______________ _____________________ and carry the greatest
_____________
 ______________ growth funds(small companies with high growth potential)

long-term growth funds(sometimes called steady-growth companies)

growth and income funds(mixed portfolio of stocks and bonds)

_________________ funds (stocks from one industry/sector)

international funds (investments outside the U.S.)
INDEX FUNDS
 buys a little bit of everything
 invests in a representative sample of the _____________ ____________ ________________
 In recent years, 90% of professionally managed mutual funds have not outperformed the S&P 500
Fund Expenses
 load funds

charge an up-front ___________ __________________________

about 3.5% on average
 back-end loads
 a charge is deducted when fund shares ____________ __________________

no-load funds

do not charge a sales fee
ADVICE FROM A SALES ADVISOR
 If you learn to make your own mutual fund decisions and buy primarily ________-____________ funds, you will
have more money to invest.
EXPENSE RATIO
 expressed as a ____________________ ______ _______________ deducted each fiscal year for fund
expenses

management fees

12b-1 fees

administrative fees

operating costs

all other asset based costs
 Expense Ratios range from 0.3% to 5%.
 You should probably avoid funds with expense ratios higher than _____________%.
 Operating expenses have a dramatic impact on the ___________-____________
______________________________ of a fund.
IN-DEPTH INFORMATION
In-depth information sources are a crucial resource to consult prior to investing in mutual funds.
MORNINGSTAR
 evaluates a fund’s performance over a _________ year period
 one-page, compact presentation
 available on subscription basis
 www.morningstar.com
STANDARD & POOR’S/ LIPPER MUTUAL FUND PROFILES
 contains the following information:

industry percentages

__________ holdings

performance data

expenses and fees

available by subscription

www.lipperweb.com
DETERMINE WHAT KINDS OF MUTUAL FUNDS YOU WANT TO CONSIDER
 Investment choices should be based on your ____________ and ________________________.

bear market

a period of ____________________ prices
 BetterInvesting recommends that long term investors focus on equity funds that invest in growth companies.
CHOOSE A GROWTH FUND
Limiting your choice of growth funds to those that have strong performance comparable to the S&P 500 index in the
3-year, 5-year, and longer periods will give you a good starting point.
IMPORTANT FACTS
 know who will be investing your money and know their _________________ _______________
 ____________________ Rate
 how often the manager buys and sells stocks in the portfolio
 capital gains are _________________
 There has not been a proven relationship between _____________ ________________ and high returns.
 Past performance is never a __________________________ of future __________________.
REVIEW YOUR PORTFOLIO
 You should ___________ __________________ on changes affecting your portfolio.
 Be skeptical of what you hear and read in the financial media.
 In investing, knowledge is __________________________.