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Feb 2012 Mutual Funds Smart Investing Slides

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Feb 2012 Mutual Funds Smart Investing Slides

  1. 1. Smart Investing Emmet O’Neal Library Mountain Brook, AL February 2, 2012 MUTUAL FUNDS: MAYBE ALL YOU’LL EVER NEED
  2. 2. Disclaimer  Andreas Rauterkus is not a registered investment advisor or broker/dealer. Readers are advised that the material contained herein should be used solely for informational purposes. Andreas Rauterkus does not purport to tell or suggest which investment securities attendants should buy or sell for themselves. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision.
  3. 3. Why Mutual Funds?  Professional Portfolio Management  Automatic Diversification  Easy to Buy and Sell  Net Asset Value (NAV)  Small Minimum Purchases  Automatic Reinvestment of Earnings  Easy Access to Information  Morningstar
  4. 4. What’s the Cost?  Front-End Loads  Upfront sales charge  Back-End Loads  Redemption fee  Deferred Loads  Sales fee charged if redeemed too early  Marketing Fees  12b-1 fees  Management Fees  Expense Ratio  Management and and 12b-1 fess as % of the fund’s assets  Does not include load fees  Brokerage Firms usually offer wide array of non-transaction fee funds
  5. 5. Calculationof Mutual Fund Costs Invest $10,000 in load mutual fund. The load fee is 4%. Actual investment = $10,000(1-.04) = $9,600 In addition fund charges .75% management fee and .10% 12b-1 fee. Fees are charged on average amount invested in the fund and recorded at the end of the year. Assume that the fund returns 5% each year. Avg. investment: [$9,600 + $9,600(1.05)]/2 =$9,840 Annual costs: $9,840(.0075+.0010) = $83.64 Value of the investment at year end: $9,600(1.05) - $83.64 = $9,996.36
  6. 6. Which Fund Should I Pick?  Investment Objective?  E.g. growth, aggressive, bonds, etc.  Investment Style  Value stocks vs. growth?  Small vs. Midsize vs. Large Cap  Performance Record  Relative to the market  Relative to funds of its type  Fees  Expense Ratio
  7. 7. Funds For Long-Term Investors  Growth Funds  Growth and Income Funds  Balanced Funds  Invest in stocks and bonds  Index Funds  Global Funds  International Funds  Socially Responsible Funds
  8. 8. Funds for Income Oriented Investors  Corporate Bond Funds  Global Bond Funds  U.S. Government Bond Funds  Ginnie Mae Funds  Municipal Bond Funds  Generally federal income tax free
  9. 9. OtherTypesof Funds  Aggressive-Growth Funds  High Yield (Junk) Bond Funds  Single-Industry Funds  Exchange-traded Funds  Bought and sold like stock  No load fees  Brokerage commission
  10. 10. Total Return Recall previous example: Initial investment = $10,000 Total return after one year: ($9996.36/$10,000) – 1 = -.000364 Or -.0364% Value of the investment at year end: $9,600(1.05) - $83.64 = $9,996.36
  11. 11. THANK YOU! Please, join me for the next workshop: March 1, 6:30PM

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