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Financial Freedom Mutual Funds
 

Financial Freedom Mutual Funds

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Module Six of the Financial Freedom Seminars provides an introduction to mutual funds and exchange traded funds as two excellent ways to handle longer-term investment objectives. You can now view the ...

Module Six of the Financial Freedom Seminars provides an introduction to mutual funds and exchange traded funds as two excellent ways to handle longer-term investment objectives. You can now view the presentation here, order the Family Financial Freedom book from any of the ebook sites for iPhone, iPad, Kindle, Nook, Kobo reader etc. contact me at floyd.saunders@yahoo.com for a copy of the presentation or more information on how to get seminar materials.

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  • None of can plan for every event that might happen in our lives, but we can take charge of owning our financial future and developing a common sense plan to more financially secure.
  • Professional Investment Management. 
By pooling the money of thousands of investors, mutual funds provide full-time, high-level professional management that few individual investors can afford to obtain independently. Such management can be important to achieving results in today's complex markets. Diversification. 
Mutual funds invest in a broad range of securities. This limits investment risk by reducing the effect of a possible decline in the value of any one security. Mutual fund shareowners can benefit from diversification techniques usually available only to investors wealthy enough to buy significant positions in a wide variety of securities. Low Cost. 
If you tried to create your own diversified portfolio of 50 stocks, you'd need at least $100,000 and you'd pay thousands of dollars in commissions to assemble your portfolio. A mutual fund lets you participate in a diversified portfolio for as little as $1,000, and sometimes less. Convenience and Flexibility. 
You own just one security rather than many, yet enjoy the benefits of a diversified portfolio and a wide range of services. Fund managers decide what securities to trade, clip the bond coupons, collect the interest payments and see that your dividends on portfolio securities are received and your rights exercised. It's easy to purchase and redeem mutual fund shares, either directly online or with a phone call. Quick, Personalized Service. 
Most mutual funds now offer extensive websites with a host of shareholder services for immediate access to information about your fund account. Or a phone call puts you in touch with a trained investment specialist at a mutual fund company who can provide information you can use to make your own investment choices, assist you with buying and selling your mutual funds shares, and answer questions about your mutual fund account status. Ease of Investing
You may open or add to your account and conduct transactions or business with the mutual fund by mail, telephone or bank wire. You can even arrange for automatic monthly investments by authorizing electronic fund transfers from your checking account in any amount and on a date you choose. Total Liquidity, Easy Withdrawal
You can easily redeem your shares anytime you need cash by letter, telephone, bank wire or check, depending on the fund. Your proceeds are usually available within a day or two. Life Cycle Planning
With no-load mutual funds, you can link your investment plans to future individual and family needs -- and make changes as your life cycles change. You can invest in growth funds for future college tuition needs, then move to income mutual funds for retirement, and adjust your investments as your needs change throughout your life. With no-load mutual funds, there are no commissions to pay when you change your investments. Market Cycle Planning
For investors who understand how to actively manage their portfolio, mutual fund investments can be moved as market conditions change. You can place your funds in equities when the market is on the upswing and move into money market mutual funds on the downswing or take any number of steps to ensure that your investments are meeting your needs in changing market climates. A word of caution: since it is impossible to predict what the market will do at any point in time, staying on course with a long-term, diversified investment view is recommended for most investors. Investor Information
Shareholders receive regular reports from the mutual funds, including details of transactions on a year-to-date basis. The current net asset value of your shares (the price at which you may purchase or redeem them) appears in the mutual fund price listings of daily newspapers. You can also obtain pricing and performance results for the all mutual funds at this site, or it can be obtained by phone from the mutual funds.
  • example indexes: NASDAQ 100 S&P500 Wilshire 2000 Dow Jones Industrial Expenses are generally lower since there is reduced overhead.
  • There are two management styles that describe all actively managed funds! Market timing The manager choose the level of risk (Beta) by moving into and out of stocks at the right time This is not the same as stock picking. Rather, the investment advisor might move between a diversified portfolio of stocks, bonds or even cash. Stock picking Managers choose idiosyncratic (firm-specific) risk by selecting stocks that will “ beat the market ” Managers try to find stocks that are under-valued (buy these) or over-valued (sell/short these). They take advantage of “ mispricing ”

Financial Freedom Mutual Funds Financial Freedom Mutual Funds Presentation Transcript

  • Family Financial Freedom Seminars Mutual Funds and EFTsSaunders Learning Group, LLC
  • Training from Saunders Learning Group Saunders Learning Group provides a variety of training programs, workshops and seminars targeted to the financial services industry. Programs are available in a wide range of topics, and we are specialists in developing custom programs that are targeted to your needs. Contact the founder, Floyd Saunders at 316-680-6482 or at floyd@floydsaunders.com for more information. Saunders Learning Group, LLC, Andover, KS Mutual Funds2
  • AgendaSaunders Learning Group, LLC, Andover, KS Mutual Funds
  • "Money frees you from doing things you dislike. Since I dislike doing nearly everything, money is handy.” - Groucho MarxSaunders Learning Group, LLC, Andover, KS Mutual Funds 4
  • goalsSaunders Learning Group, LLC, Andover, KS Mutual Funds
  • Benefits of Mutual Funds  Professional Management:  Informed money managers may make better decisions than uninformed investors.  By pooling the money of thousands of investors, mutual funds provide full-time, high-level professional management that few individual investors can afford to obtain independently.  Reduced transaction costs: Costs are reduced with economies of scale.  Direct Costs: Brokerage and exchange fees. Try to create your own diversified portfolio of 50 stocks ` youd need at least $100,000 and you will pay thousands of dollars in commissions to assemble your portfolio. A mutual fund lets you participate in a diversified portfolio for as little as $1,000, and sometimes less.  Indirect Costs: Search costs and decision making  Taxes: These costs might be higher or lower depending on certain factorsSaunders Learning Group, LLC, Andover, KS Mutual Funds
  • Benefits of Mutual Funds  Diversification & Divisibility:  A single investment is immediately diversified through the fund’s holdings  Since a share in the fund is a proportion interest in the securities held, this could represent fractional interest in the underlying security (Example: Would be very difficult to replicate an S&P500 index fund within a personal portfolio)  Liquidity:  Underlying fund securities are often illiquid (like Real Estate or certain non-traded debt)  If investors can redeem or trade fund shares, then these underlying assets become liquid  Investing through funds might be the only avenue for investing in otherwise illiquid securities – improves market completeness, and hence efficiency.  Record Keeping: The central agent aggregates holdings, computes gains and taxable income, and sends statements.Saunders Learning Group, LLC, Andover, KS Mutual Funds
  • Types of mutual fundsSaunders Learning Group, LLC, Andover, KS Mutual Funds
  • Selecting A Mutual Fund : Types of Funds Saunders Learning Group, LLC, Andover, KS Mutual Funds
  • Selecting A Mutual Fund : Types of Funds Saunders Learning Group, LLC, Andover, KS Mutual Funds
  • Selecting A Mutual Fund : Types of Funds Saunders Learning Group, LLC, Andover, KS Mutual Funds
  • Selecting A Mutual FundWith a mutual fund, return comes from the change in the netasset value, capital gains distributions, and incomedistributions. change in net asset + capital gains + distributions income value distributions before-load(gross) return = beginning net asset value change in capital gains net asset+ distributions + distributions -load income value fee after-load(net) return = beginning net asset value Saunders Learning Group, LLC, Andover, KS Mutual Funds 12
  • Management Styles  Passively managed funds: The investment advisor tracks an index and rebalances holdings only when an index changes composition, There is no investment decision making — no information collecting, and — no attempt to “beat the market”.  Are index funds really passively managed? No! An index fund manager delegates the decision making to the institutional organization that has created and manages the composition of the benchmark index – Dow Jones, Standard and Poors, NASDAQ, Willshire…Saunders Learning Group, LLC, Andover, KS Mutual Funds
  • Management Styles Actively managed funds: An investment advisor actively trades securities in an attempt to beat the market.  Market timing  Stock picking What is the value of having and active fund manager? Less than 10% of actively managed funds beat their index on an average year. Saunders Learning Group, LLC, Andover, KS Mutual Funds
  • Unit Trusts and Exchange Traded Funds  Unit Investment Trust:  A unit trust is similar to a closed-ended fund in that the number of units is fixed  It is different in that the investments do not change over the duration of the fund life. The trust might consist of a portfolio of bonds that are held until maturity.  Exchange Traded Fund: A cross between all three of the prior investment companies  Similar to a closed-end fund, there is continuous trading of shares  Similar to an open-end fund, investors can redeem shares (they receive the underlying securities)  Investments are generally passive (do not change), tracking an index.Saunders Learning Group, LLC, Andover, KS Mutual Funds
  • Exchange Traded Funds  ETF characteristics that are similar to other types of investment companies  Closed-end fund: Priced at every point in time, trade in secondary market.  Open-end fund: Investors can purchase new shares, and share can be redeemed, in addition to trading on a secondary market.  Unit Trust: The investments are passive  ETF’s generally track and index.  What are the important features of an ETF that contribute to it explosive growth?  Shares are liquid and can be traded at any point in time. This circumvents mutual fund restrictions of buying in by 1PM at the 4:30PM price  If the Stock price deviates from the NAV, then arbitragers can redeem large blocks of stock and take advantage of the mis-pricing. The result is that ETF shares reflect fairly closely the value of the underlying stock.Saunders Learning Group, LLC, Andover, KS Mutual Funds
  • ETFs vs. Stocks & Mutual Fund Functionality ETFs Stocks MF UnitReal time trading and pricing throughout Yes Yes Nomarket hoursAbility to put limit orders Yes Yes NoCan be traded real time on the NSE Yes Yes NoIs Arbitrage possible between Futures and Yes Yes NoCash MarketIs Diversification possible with a single unit Yes No YesReturns at per with the market/index Yes No NoIntra day trading Yes Yes NoPaper Less investing Yes Yes NoExit Load No No Yes Saunders Learning Group, LLC, Andover, KS Mutual Funds
  • Mutual Fund v. ETF  With all of these advantages, why aren’t Mutual Funds gone?  ETF’s trade on an exchange, and investors are charge brokerage fees (ie. $19.95 per trade). If you are a dollar cost average investors (invest a little bit each month), then these fees become significant. Mutual funds will generally let you add investment to your funds without additional transaction feels.  Popular ETF’s  QQQ: Qubes – Nasdaq 100  DIA: Diamonds – Dow Jones Industrial Average  WEBS: ishares – World Equity Benchmark (MSCI – Morgan Stanley Capital International index)  SPR: SPDRS – SP500 indexSaunders Learning Group, LLC, Andover, KS Mutual Funds
  • Fees Most mutual funds separate their charges into a number of categories, making it difficult to determine the actual cost of investing. Some fees are avoidable, others can be managed. Load vs. No-Load Fees  Load funds have a sales force and the shareholders have to pay a sales charge.  If paid at the time of purchase, the fee is a front-end load.  If levied when shares are sold, the fee is a back-end load, or contingent deferred sales charge.  A no-load fund charges no sales commission.  In addition, all funds have management and administrative fees  Some funds have fees for marketing costs (known as 12-1B charges) Saunders Learning Group, LLC, Andover, KS Mutual Funds
  • Compensation and Fee Structure Mutual Funds charge fees that are independent of performance.  Mangers cannot tie their pay to performance unless they apply the compensation equally to gains as well as losses.  The magnitude of the downside is too large to make feasible, so instead, their compensation is tied to fund size. This is done in the following way Loads: Front/back-end fees are charged to investors entering/exiting a fund.  Historically these fees were around 2-3% (Charged as a percent of amount invested), and can be as high as 8.5% per government restrictions  Industry competition has largely eroded these fees. Most funds can now be bought as “no-load” 12b-1 fees: Advertising fees, must be less than 1%, and are charges as a percent of assets under management (fund size) Management fees: Charged annually as a percent of assets by the investment advisor, and may be as low as 18 basis points or as high as 2%. This is independent of fund performance. Saunders Learning Group, LLC, Andover, KS Mutual Funds
  • Dollar Cost Averaging Dollar-cost averaging is investing a fixed amount monthly regardless of the share price Dollar-cost averaging allows you to automatically buy more shares when prices are lower and fewer shares when prices are higher. Over time, this tends to reduce the average cost of the shares you purchase. Saunders Learning Group, LLC, Andover, KS Mutual Funds
  • Dollar Cost Averaging Example Saunders Learning Group, LLC, Andover, KS Mutual Funds
  • 4 Easy PortfoliosMorningstars suggested portfoliosAssumes investors have time horizons at least 10 years to ride out the ups and downs of the stock market.Assumes a portfolio in a tax-deferred account, such as an IRA or 401(k).Portfolio #1: A target-date fund Portfolio #2: An all-index fundsA ready-made portfolio that automatically An all-index portfolio made up of threeadjusts to become more conservative as the Vanguard funds: one that invests inyears pass. All you do is choose the date you bonds, one that covers the entire U.S.expect to cash out. stock market, and a third that holds international stocks.Example companies: T. Rowe Price Retirementand the Vanguard Target Retirement funds. Saunders Learning Group, LLC, Andover, KS Mutual Funds
  • Portfolio #3: all-ETFs Portfolio #4: Mix it up Use index funds as your mainInvestors who dont have enough cash holdings, but include a few activelyto create the Vanguard portfolio can managed funds to juice returns. Income close with exchange-traded one example, Gunter reserves a slicefunds. of the 55 percent U.S. stock allocation for an actively managed small-company fund. Saunders Learning Group, LLC, Andover, KS Mutual Funds
  • QuestionsSaunders Learning Group, LLC, Andover, KS Mutual Funds
  • Post Workshop Action Plan  Complete the Post Workshop Action Plan Saunders Learning Group, LLC, Andover, KS Mutual Funds26
  • Reference Material Family Financial Freedom 140 pages ISBN 978-1-60-746269-9 Available Formats: 6"x9" paperback PDF download eBook download Link to order: http://www.fastpencil.com/publications/4498-Family-Financial-Freedom?tid=book Also available on Kndle, Nook, iPad and other popular e-readers can be ordered from Amazon or Barnes and Noble in paperback (available soon). Book summary: You might be struggling to make ends meet, but achieving true financial freedom is still possible. The good news is virtually anyone with a desire to learn and the willingness to plan can achieve a considerable degree of financial security. This book is a road map to the personal financial freedom you want and deserve. There are no quick-rich schemes here, just common sense advice on how to manage your money, protect your family from risks and start making the moves to being more financial secure.Saunders Learning Group, LLC, Andover, KS Mutual Funds