Types of mutual Funds

1
Types of mutual Funds

• CH. 6 Decoding Wall Street
• Fundamentals of Investing

2
Investment Objectives

• What the manager of the fund seeks to provide
• 3 primary-
• Retirement
• College education
• Rainy day fund
• 33 real investment objectives

3
Stock funds

• Capital Appreciation funds

• Total Return funds

• Aggressive growth
• Growth funds
• Sector funds
• Can be more volatile

• Growth-and-income
• Income equity
• Emerging markets
• Global equity
• Regional equity

World Equity funds
4
Other foreign investments/risks

• WEBs- World Equity Benchmark
• Sold on the AMEX
• Political risk
• Costs- average management fee 1.87
• Currency- profits lost in conversion
• Regulation-

5
Bond Funds

• Taxable

• Tax Free

• General- 2/3 in US securities
• Intermediate term
• Short term
• High yield- junk bonds with poor credit ratings

• State municipal- NY and CA
• Federal municipal

6
Money Market Funds

• Invest in short term, high grade securities
  (IOUs)
• Taxable and tax-exempt
• Convenience while waiting to return to stocks and
  bonds

7
Hybrid and Index funds

• Hybrid
• Invest in a mix of stocks, bonds, derivatives
• Futures and options

• Index- cheap fees
• Mirror the selected index
• S P 500, Wilshire 5000, SPDRs

8
Picking and choosing

• Balance- diversification
• Styles- true to original goals
• Cost- fee structure
• Risk- compare beta, Morningstar risk, P/E ratio

9
Warning signs

• New manager
• 3 quarter underperformance
• Heavy turnover
• Large bets in certain sectors
• Style changing from original objectives