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
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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:
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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