Mutual Funds Mutual fund – a business that accepts deposits from many people to invest in various ways -each deposit is used to pay for a portion of the stocks or bonds the fund purchases -professionals employed by the fund make transaction decisions

Mutual Funds (cont.) -generally require a minimum of $1000 investment -your return is a share of the dividends and/or capital gains/losses -Purchase through brokerage such as Merrill Lynch, TD Waterhouse

Costs of Mutual Funds -All charge annual maintenance fees (0.2 – 3% of the value of your investment) -Some charge sales fees (5-6% to pay for marketing of fund) – paid when buying shares OR when selling shares

Why invest in mutual funds? 1. Limited amount of investment can still be diversified. 2. Many are managed to delay owners’ taxes until owner redeems their investment. 3. You do not have to follow the market to be informed about transaction decisions.

How to choose mutual funds 1. Choose the investment objective (low, med, high risk) that fits your tolerance. 2. Consider whether you want returns now (dividends) or later (capital gains).

Risk/Return Pyramid for Mutual Funds Blue Chip Funds Tax- Free Funds Growth and Blue Chip Funds Growth Funds Great Risk and Potential Return Lower Risk and Potential Return

How to research mutual funds 1. Financial publications – annual eval./compare -Fortune, Forbes 2. Internet 3. Request info from company -prospectus – publication describing how fund is operated, objectives, and fees