COA 4131 1st Edition Lecture 27 Outline of Last Lecture I. Bonds and BondholdersII. The Role of Bonds in Investment PlanIII. Definition and Explanations of Corporate Bonds IV. Government Bonds V. Bond Ratings VI. What’s Best for Inflation Protection Outline of Current Lecture I. Mutual Funds Defined and ExplainedII. ObjectivesIII. Summary of Steps to Follow in Selecting Funds IV. Purchasing Mutual Funds Current LectureA. Mutual Funds Defined and Explaineda. How mutual funds worki. Load funds1. There are fees when you buy in, when you manage it, and when you sell it 2. Can be a very low amount ii. No load funds1. No direct fees2. No sales charge3. Usually still a management feea. They need to make money somewhere iii. One is not better than the other iv. 12b-1 fee1. Deals with advertising and marketing2. Advertising fee b. Open-ended and closed-end mutual fundsi. Open-end mutual funds- 90%ii. Closed-end mutual funds- 10%iii. Index funds1. Excellent 2. Ex: S%P 500B. Objectives a. Funds objectivesi. Figure out what’s the goalii. Current incomeiii. Capital growth 1. It will be worth more2. Anticipate how much it is going to grow iv. Conservation of principal 1. For the future and future growth b. Prospectus i. Something untriedii. More of a chance and risk c. Annual reportd. Professional advisory services e. Size and type of company f. Social responsible funds i. Cigarette and tobacco going down in U.S. but increasing in Asia and other places around the worldii. Child labor is something that some think ofg. Summary of mutual fund information i. Diversifyii. Find out quality of eachiii. Don’t have to go through employer C. Summary of Steps to Follow in Selecting Funds a. How to read mutual funds section of the newspaper and on onlinei. Some free, some cost money1. Don’t buy unless you are heavily invested b. Mutual funds for children D. Purchasing Mutual Fundsa. Regular account transactionsi. Most common ii. Can go online or do it direct with brokerb. Voluntary savings plani. T-Row price c. Contractual plansi. Can pay it up front or over a few yearsd. Reinvestment plans i. Put it back in and get more and more shares ii. Usually what you want to doe. Selling or rebalancing mutual fundsf. Taxation and mutual fundsi. Always ask about thisii. Tax implicationsg. Funds as a gatewayi. The competition grows h. Equity fundsi. Means the same thing as stocksii. Higher return means higher risk i. Money market fundsi. Not guaranteed like money in a bank, but pretty closeii. Guaranteed because what is behind itiii. A little more risk, but worth it j. Hedge funds i. For the more sophisticated investorii. Short termiii. Hedging whether market is going to go up or down in mutual funds 1. Much more
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