1. Investing in Mutual Funds, Exchange traded funds, and Real Estate
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2. The Mutual Fund Concept
Investors buy into a diversified portfolio of securities for the collective benefit of individual investors
Pooled diversification

3. Basic Mutual Fund Structure

4. Why Invest in Mutual Funds
Diversification
Professional Management
Financial Returns
Convenience
But remember - No choice in securities selection and
no control over sale of securities within fund

5. How Mutual Funds are Organized and Run
Each fund is a separate corporation or trust owned by shareholders
Management company - runs daily operations
Investment advisor - oversees portfolio
Distributor - sells fund shares
Custodian - safeguards fund’s assets
Transfer agent - executes transactions and maintains shareholder records

6. Net Asset Value (NAV)
Net value of all securities held in fund’s portfolio
NAV =
current price of fund assets - liabilities
number of outstanding shares

7. Exchange-Traded Funds (ETFs)
Typically structured as index funds
Spiders based on S&P 500
Diamonds based on DJIA
Qubes based on Nasdaq 100
Trade on listed exchanges like closed-end funds
Numbers of shares change like open-end funds

8. Important Cost Considerations
Load and No-load Funds
Load funds charge a commission when purchased (Front-end load) or sold (Back-end load)
No-load funds charge no commission

9. Important Cost Considerations
12(b)-1 Fees - annual fees for distribution and marketing
Management Fees - annual fees charged by all funds to pay the fund manager

10. Money Market Mutual Funds
General-purpose money funds
Tax-exempt money funds
Government securities money funds
All highly liquid, low risk

11. Index Funds
Rather than beat the market index funds try to match the market
Index has a buy and hold approach unless it alters its “market basket”

12. Sector Funds
Restricts investments to a particular sector of the market
Popular sectors include real estate, technology, financial services, natural resources, electronics, telecommunications, and health care

13. Socially Responsible Funds (SRFs)
Invest only in firms meeting certain moral, ethical, or environmental factors
Exclude tobacco, alcohol, gambling, weapon contractors, nuclear power plants

14. Services Offered by Mutual Funds
Automatic Investment Plan
Automatic Reinvestment Plan
Regular Income - fund automatically pays out predetermined amount to investor

15. Services Offered by Mutual Funds
Conversion (or exchange) Privileges
shareholders easily move from one fund to another within the fund family
Retirement Plans
funds set up and administer retirement plans

16. Making Mutual Fund and Exchange Traded Fund Investments
The Selection Process
Decide which funds to buy by assessing your needs
Consider your investment objectives
What is your intended use of the fund
What services are important to you

17. Measuring Fund Performance
Returns consist of: Past performance does not guarantee future returns
Dividend income
Capital gains distributions
Change in fund's share price

18. Investing in Real Estate
Provides greater diversification than holding just stocks or bonds
Less volatility than stocks

19. Some Basic Considerations
Cash flow and taxes
Depreciation write-offs reduce taxes
Passive investment
Appreciation in value
Use of leverage
Borrowed money magnifies returns

20. Investing in Income Property
Commercial property
Office buildings, industrial space, warehouses, retail space, hotels
Residential property
Homes, apartments, small multifamily buildings

21. Other Ways to Invest in Real Estate
Real Estate Investment Trusts (REITs)
Closed-end investment companies holding real estate
Offer diverse, marketable way to invest in real estate
Equity REITs invest in properties
Mortgage REITs invest in mortgages
Hybrid REITs invest in both
Real estate limited partnerships (LLCs)
Limited liability partnerships