1. MUTUAL INTERESTS 3 3.1 MUTUAL FUNDS 3.2 INVESTIGATE MUTUAL FUNDS
3.3 CHOOSE MUTUAL FUNDS

2. INDUSTRY INDICATORS Alberto-Culver
Single product focus that expanded to multiple product lines
Television advertising innovations
On-going acquisitions have fueled growth and profits
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3. Lesson 3.1 Mutual Funds
Goals
Describe mutual funds and explain the advantages of mutual fund investing.
Discuss the different types of mutual funds.
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4. WHAT ARE MUTUAL FUNDS?
an assortment of stocks, bonds and other investments
a shareholder owns a portion of the fund’s entire investment portfolio
professional fund managers manage the fund
shareholders obtain a share of the profits
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6. MUTUAL FUND PRICES AND NET ASSET VALUE (NAV)
NAV = Value of Portfolio - Liabilities Number of Shares
calculated at the end of each business day
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7. WHY ARE SO MANY PEOPLE BUYING THEM?
Diversification
Professional Fund Management
Convenience
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8. FAMILY OF FUNDS
If you own shares in a fund that belongs to a family of funds, you can transfer from one fund to another whenever your investment needs change.
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9. THE MUTUAL FUND UNIVERSE
Mutual funds have winners and losers.
Professional fund management does not guarantee success.
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10. GOALS AND RISK When selecting a mutual fund, you should:
determine your goals
decide the level of risk you are comfortable with
research the fund’s performance prior to investing
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11. 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
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12. IMPORTANCE OF COMMON STOCK FUNDS
aggressive growth
long-term growth
growth and income
sector funds
international funds
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13. INDEX FUNDS index funds buys a little bit of everything
invests in a representative sample of the entire stock market
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14. Lesson 3.2 Investigate Mutual Funds
Goals
Describe an expense ratio and why it is important.
Explain where to go for information on mutual funds.
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15. LIGHTEN THE LOAD load funds no-load funds back-end loads
charge an up-front sales commission
about 3.5% on average
no-load funds
do not charge a sales fee
back-end loads
a charge is deducted when fund shares are sold
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16. ADVICE FROM A FINANCIAL ADVISOR
If you learn to make your own mutual fund decisions and buy primarily no-load funds, you will have more money to invest.
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17. EXPENSE RATIO expense ratio
expressed as a percentage of assets deducted each fiscal year for fund expenses
management fees
12b-1 fees
administrative fees
operating costs
all other asset based costs
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18. GETTING THE LOWDOWN
Newspaper tables provide a quick overview of mutual funds.
Newspaper tables can be found in local newspapers as well as The Wall Street Journal.
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20. IN-DEPTH INFORMATION
In-depth information sources are a crucial resource to consult prior to investing in mutual funds.
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21. MORNINGSTAR MUTUAL FUNDS
evaluates a fund’s performance over a 10 year period
one-page, compact presentation
available on subscription basis
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22. STANDARD & POOR’S/LIPPER MUTUAL FUND PROFILES
contains the following information:
industry percentages
top holdings
performance data
expenses and fees
available by subscription
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23. OTHER INFORMATION SOURCES
August issue of Forbes magazine
Money magazine
survey of 2500 mutual funds
Business Week magazine
bwnt.businessweek.com/mutual fund/
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24. BetterInvesting’s Mutual Fund Education and Resource Center
Mutual Fund Educational Alliance
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25. Investing for Beginners Brill’s Mutual Funds Interactive
Moneytalk web site
Investing for Beginners
Brill’s Mutual Funds Interactive
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26. Lesson 3.3 Choose Mutual Funds
Goals
Find information in the Morningstar Mutual Fund Reports.
Analyze a mutual fund’s portfolio and asset allocation.
Evaluate statistical information related to performance, fees and costs, and risk.
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27. USE THE EQUITY MUTUAL FUND CHECK LIST
BetterInvesting Equity Mutual Fund Check List
how the fund invests
what the fund invests in
the tenure and effectiveness of current management
tax considerations
what percentage of your investment is used to pay the fund’s expenses
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28. WHERE TO FIND INFORMATION
Morningstar’s Mutual Funds publication
1,700 funds
Equity Funds
Fixed-Income Funds
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30. DETERMINE WHAT KIND OF MUTUAL FUNDS TO CONSIDER
Investment choices should be based on your goals and timetables.
bear market
a period of declining prices
BetterInvesting recommends that long term investors focus on equity funds that invest in growth companies.
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31. 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.
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33. SAMPLE MORNINGSTAR REPORT
+/-S&P 500 figures
measure the difference between a stock fund’s total return (%) and the total return of the S&P 500 index
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34. SAMPLE OVERVIEW SHEET an Overview sheet
provided for each fund category
summarizes the performance of all the funds in that category
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35. CHECK LIST SUMMARY COMPLETE THE TITLE BLOCK
Do the minimum and additional purchase amounts meet your needs?
Can the fund be used as a tax deferred account?
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36. Section 1 Prospectus Objective
classifies funds based on stated goals from the fund’s prospectus
Is the fund investing the way it says it will?
Do the holdings represent the stated objective?
Are the individual stocks in the fund good quality stocks?
Is there stock diversification across industries?
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42. capital gains are taxed
Section 2
know who will be investing your money and know their performance history
Turnover Rate
how often the manager buys and sells stocks in the portfolio
capital gains are taxed
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43. Section 3
There has never been a proven relationship between high expenses and high returns.
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44. Section 4
The questions in this section put the basics of the Check List into personal perspective.
You should have a clear understanding of these issues before investing.
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45. SUMMARY Past performance is never a guarantee of future results.
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46. NOT A RECOMMENDATION
The Vanguard U.S. Growth Fund was used as an example for teaching purposes.
This example is not a recommendation to purchase the fund.
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47. REVIEW YOUR PORTFOLIO
You should stay current on changes affecting your portfolio.
Be skeptical of what you hear and read in the financial media.
In investing, knowledge is power.
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48. SUMMARY 3.1 MUTUAL FUNDS 3.2 INVESTIGATE MUTUAL FUNDS
3.3 CHOOSE MUTUAL FUNDS
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49. PERFORMANCE INDICATORS EVALUATED
Explain the relationship between investments and future goals.
Describe investments for different levels of risk.
Categorize different investments according to level of risk.
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50. Estimate future returns on investment options.
Explain the importance of evaluating current spending to determine future investing.
Estimate future returns on investment options.
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51. THINK CRITICALLY
Why must serious investors make adjustments to their current spending habits?
Why can a younger single person make riskier investments?
Why must Jason make his investment strategy a long-term plan?
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52. Why should investors consider tax-deferred investment options?
Why should Jason look at the performance of possible investments for the past five years before making a decision?
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