1. Investment Companies  Net Asset Value (NAV)  (Total portfolio value - liabilities) / # of shares  Management is usually contracted to an outside firm with fees ranging from 1/4% to 1/2% a year.  Often management companies will start many funds and will provide advisory services, etc. for them.

2. Open-end Fund (Mutual Fund)  new shares sold as demanded.  company will buy back the shares at any time.

3. Closed-end Investment Company  set number of shares / bought & sold on exchange  market price usually < NAV, but... –emerging markets funds  changes in the discount affect total return  dividend yield usually above average because of discount  must pay commission to buy or sell

4. Load vs. No-load  most all funds obtained through brokers will have a load  load = sales fee  price = NAV + sales fee of 7 1/2% to 8%  usually no redemption fee  no-load funds are sold at NAV  low-load funds have a fee of only about 3%

5. Tradeoffs Between Loads and Fees  many no-load funds charge up to 1 1/2% per year for management  some low-loads do this also.  all funds charge management fees of from 1/2% to 1 1/2%.  *** Read Prospectus ***

6. Types of Investment Companies  Common stock funds –growth –income –index –mixed –industry specific (health care, airlines, etc.) –ecology minded –regional funds

7. Types of Funds, con’t.  Balanced funds –stocks and bonds –percentages vary greatly –See prospectus for strategy  Bond funds –corporate, government, junk, capital gains plays –mixed, municipals (state specific), income  Money market funds

8. Performance  After expenses, most funds do not consistently beat the market  Performance figures do not take taxes into account  The funds that tend to be the best in a given year do not tend to continue to perform at the top. Why?

9. Implications of Performance Studies  For investors with little money?  For investors with more money?  Advisability of diversification among funds?

10. Tax Consequences of Mutual Funds  Annual tax liability  Comparison to individual stock and bond portfolio  Implications?  Sources of information on mutual funds