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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.

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Lelia Lubowitz
Lelia LubowitzLv2
29 Sep 2019

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Calcin Jacobs is a widower who recently retired after a long career with a major Midwestern manufacturer. Beginning as a skilled craftsman, he worked his way up to the level of shop supervisor over a period of more than 30 years with the firm. Calvin receives social security benifits and a generous company pension. Together, these two sources amount to over $4,500 per month (part of which is tax-free). The Jacobses had no children, so he lives alone. Calvin owns a 2-bedroom rental house that is next to his home, and the rental income from it covers the mortgage payments for both the rental house and his house.

Over the years, Calvin and his late wife, Allie always tried to put a little money aside each month. The results have been nothing short of phenomenal. The value of calvins liquid investments (all held in bank CDs and savingd accounts) runs well into the 6 figures. Up to now, Calvin has just let his money grow and has not used any of his savings to supplement his Social Security, pension, and rental income. But things are about to change. Calvin has decided, "What the heck, it's time I start living the good life!" Calvin wants to travel and, in effect, start reaping the benifits of his labors. He has therefore decided to move $100,000 from a savings accounts to 1 or 2 high-yielding mutual funds. He would like to receive $1,000 to $1,500 a month from the fund(s) for as long as possible because he plans to be around for a long time.

a. Given Calvin's financial resourced and investment objectives, what kinds of mutual funds do you think he should consider?

b. What factors in Calvin's situation should be taken into consideration in the fund selection process? How might these affect Calvin's course of action?

c. What types of services do you think he should look for in a mutual fund?

d. Assume Calvin invests in a mutual fund that earns about 10% annually from dividend income and capital gains. Given that Calvin wants to receive $1,000 to $1,500 a month from his mutual fund, what would be the size of his investment account 5 years from now? How large would the account be if the fund earned 15% on average and everything else remained the same? How important is the fund's rate of return to Calvin's investment situation?

Calvin Jacobs is a widower who recently retired after a long career with a major midwestern manufacturer. Beginning as a skilled craftsman, he worked his way up to the level of shop supervisor over a period of more than 30 years with the firm. calvin receives social security benifits and a generous company pension. Together, these two sources amount to over $4,500 per month. (part of which is tax-free) the jacobs had no children, so he lives alone. calvin owns a two bedroom rental house that is next to his home, and the rental income from it covers the mortgage payments for both the rental house and his house. over the years, calvin and his late wife, allie always tried to put a little money aside each month. the results have been nothing short of phenomenal. the value of calvins liquid investments (all held in bank CDs and has not used any of his savings to supplement his social security, pension, and rental income. But things are about to change. calvin has decided, "what the heck, it's time i start living the good life!" calvin wants to travel and, in effect, start reaping the benifits of his labors. he has therefore decided to move $100,000 from one of his savings accounts to one of two high-yielding mutual funds. he would like to receive $1,000-$1,500 a month from the fund(s) for as long as possible, because he plans to be around for a long time. a. what kind of mutual funds do you think he should consider b.what factors in calvin's situation should be taken into consideration in the fund selection process? how might these affect Calvin's course of action? c. what types of services do you think he should look for in a mutual fund? d. assume calvin invests in a mutual fund that earns about 10% annually from dividend income and capital gains. given calvin wants to receive $1,000 to $1,500 a month from his mutual fund, what would be the size of his investment account give years from now? how large would the account be if the fund earned 15% on average and everything else remained the same? how important is the fund's rate of return to calvins investment situation?

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