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What is a mutual fund? What types of fees do I pay when I purchase/hold one? Find me a mutual fund to invest in (provide the ticker symbol and fund name) that has a beta close to 1.0

Are mutual funds ALWAYS a better investment than an individual stock? Explain/support your answer.

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Elin Hessel
Elin HesselLv2
28 Sep 2019

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Could someone please answer the following questions for any mutual fund of your choosing:

1) What is the name of your fund and what is the ticker symbol?

2) What is the fund's investment strategy (i.e. large cap stock, mid cap stock, technology, etc.)?

3) What are the fund's past 1,3,5 and 10 year performance returns?

4) What is the fund's appropriate benchmark?

5) What are the fund's fees and expenses?

6) What is the fund's 3 year standard deviation (risk) of the fund and do you think that this is a good estimate of the risk going forward? Did the firm recently make changes to the portfolio that made the fund more or less risky?

7) What are the mutual fund's top 5 holdings?

8) What sectors is the fund overweight and underweight compared to its benchmark and category average?

9) Why did you select this mutual fund for this assignment?

10) Calculate how much money you would need to save every month in order to accumulate $250,000 in 15 years using the 10-Year track record of returns from your fund as I/Y?

Todd O’Hanlon has worked in the management services division of Focus Consultants for the past five years. He currently earns an annual salary of about $120,000. At 33, he’s still a bachelor and has accumulated about $100,000 in savings over the past few years. He keeps his savings in a money market account, where it earns about 3 percent interest. Todd wants to get “a bigger bang for his buck,” so he has considered withdrawing $50,000 from his money market account and investing it in the stock market. He feels that such an investment can easily earn more than 3 percent. Heidi Jackson, a close friend, suggests that he invest in mutual fund shares. Todd has approached you, his broker, for advice.

What special fund features might help Todd achieve his investment objectives? What types of mutual funds or ETFs would you recommend to Todd? What recommendations would you make regarding Todd’s dilemma about whether to go into stocks, mutual funds, or ETFs? Explain. Explain to Todd the rationale for choosing ETFs over mutual funds.

Eileen Ponders Mutual Funds

Eileen Mahurin is the director of a major charitable organization in Knoxville, Tennessee. A single mother of one young child, she earns what could best be described as a modest income. Because charitable organizations aren’t known for their generous retirement programs, Eileen has decided it would be best for her to do a little investing on her own. She’d like to set up a program to supplement her employer’s retirement program and, at the same time, provide some funds for her child’s college education (which is still 12 years away). Although her income is modest, Eileen believes that with careful planning, she could probably invest about $250 a quarter, and she hopes to increase this amount over time. Eileen now has about $15,000 in a bank savings account, which she’s willing to use to kick off this program. In view of her investment objectives, she isn’t interested in taking a lot of risk. Because her knowledge of investments extends no further than savings accounts, series EE bonds, and a little bit about mutual funds, she approaches you for some investment advice.

Critical Thinking Questions

In view of Eileen’s long-term investment goals, do you think mutual funds or ETFs are the more appropriate investment vehicle for her?

Do you think that she should use her $15,000 savings to start a mutual fund or an ETF investment program?

What type of mutual fund or ETF investment program would you set up for Eileen? In your answer, discuss the types of funds you’d consider, the investment objectives you’d set, and any investment services (such as withdrawal plans) you’d seek. Would taxes be an important consideration in your investment advice? Explain.

Do you think some type of real estate investment would make sense for Eileen? If so, what type would you suggest? Explain.

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