Identify why people invest in mutual funds. Distinguish among the four major objectives of mutual funds. Classify mutual funds by portfolio. List the unique benefits of mutual funds. Describe the various charges and fees associated with investing in mutual funds. Explain how to select a mutual fund in which to invest. Recognize valid reasons for selling a mutual fund investment. open-end investment company combining funds of investors who have purchased shares in a diversified portfolio of securities. Wayne Lippman | wayne lippman real estate | wayne lippman miami | wayne b lippman | wayne lippman brooklyn | wayne lippman bid rigging | wayne lippman rww properties | penny lippman | lippman associates | Wayne Lippman CPA | Wayne Lippman Walnut Creek | Wayne Lippman Tax Tips | Wayne Lippman Accountant | Wayne Lippman Accounting | Wayne Lippman Oakland | Wayne Lippman San Francisco | Lippman & Associates | Retirement | Investment | Investing | Investing Basics | Wayne Lippman Walnut Creek | Wayne Lippman Tax Tips | Wayne Lippman Accountant | Wayne Lippman Accounting | Wayne Lippman San Francisco | Lippman & Associates | #waynelippman | CPA Wayne Lippman | Wayne Lippman Tax Planning | Tax Tips | Tax Tips 2015 | Tax Tips for consumers | Save money on taxes | Lippman & Assocaites CPAs

1. Investing Through Mutual Funds
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Walnut Creek, CA

2. Objectives
Identify why people invest in mutual
funds.
Distinguish among the four major
objectives of mutual funds.
Classify mutual funds by portfolio.
List the unique benefits of mutual funds.

3. Objectives
Describe the various charges and fees
associated with investing in mutual funds.
Explain how to select a mutual fund in
which to invest.
Recognize valid reasons for selling a
mutual fund investment.

4. Investing Through Mutual Funds
open-end investment company combining
funds of investors who have purchased
shares in a diversified portfolio of securities.
MUTUAL FUND . . .

5. What is a Mutual Fund?
A pool of money
Managed by a professional investor
Manager works for an investment firm
Each fund has a specific objective
Over 6,000 funds to choose from

6. Figure 15.1

7. Three Reasons Why People
Purchase Mutual Funds
Diversification
 funds of many investors are pooled and
used to purchase a variety of investments
Professional management
 who is the fund’s manager?
 managers can change
Convenience
 phone
 mail 16-3

8. New/more types of funds
Few or no sales charges
Some performed better than common
stock
Widespread marketing
Selection is easier
Reasons for Investing Through Mutual
Funds

9. Dispense profits to investors
Investors expect dividend income
Investors expect price appreciation
Reasons for Investing Through Mutual
Funds

10. Closed and Open End Funds
Closed end fund (10% of funds)
limited number of shares issued initially
then can only purchase shares from
another investor willing to sell theirs
Open end fund (90% of funds)
no limitations on the number of shares
the investment company can issue
shares are issued and redeemed by the
investment company

11. Net Asset Value
portfolio market value - liabilities
the number of shares outstanding
Offer price = NAV + sales commission

12. Objectives of Mutual Funds
Current income
Long-term growth
Growth and income
Balanced

13. Common stock
Balanced
Bond
Specialty
Money market
Classification of Mutual Funds

14. Aggressive growth
Growth
Value
Growth and income
Classification of Mutual Funds
Small company
Sector
Global/international
Index
COMMON STOCK:

15. Recordkeeping/reporting
Easy purchase and sale
Automatic reinvestment
IRS-qualified tax-sheltered retirement
Withdrawal plans
Collateral for loans
Unique Benefits of Mutual Funds

16. Costs of Investing Through Mutual
Funds
Hidden fees
 Deferred load
 Redemption
 12b-1
Disclosure of Fees
“Which is better, load or no-load?”

17. Management Fees and Other
Charges
One-time sales load fees
12b-1 fees
•Cannot exceed more than 1% of the funds assets per
year
•For a fund to be classified as no-load these fees cannot
exceed more than 0.25% of the funds assets per year.

18. Load vs. No Load Funds
 Load Fund
 pay a commission to a sales
agent when you buy shares
 usually 3-8%
 No Load Fund
 no sales charge paid
 purchased directly from the
investment company
 usually have an 800 number you can call

19. Management Fees and Other Charges
Management fee
charged yearly (.25 - 1%) based on a
percentage of the funds asset value
Contingent deferred sales load
charged upon withdrawal of funds (1-6%)
decreases with time held
12b-1 fees
fee to defray advertising and marketing
costs of the fund

20. Match goals
Locate sources of comparative
performance data
 Financial press (i.e. Wall Street Journal,
Barron’s)
 Magazines (i.e. Fortune, Kiplinger’s)
 Specialized mutual fund publications
Strategies for Selecting a Mutual
Fund

21. Explanatory Notes
f-Previous day’s quotation
g-footnotes x and s apply
j-footnotes e and s apply
p-distribution costs apply, 12b-1
r-redemption charge may apply
s-stock split or dividend
t-footnotes p and f apply
v-footnotes x and e apply

22. Interpret comparative performance
information over time
 Long-term/short-term performance
 Size of fund
 Fund performance in up/down markets
Read prospectuses and annual reports
Strategies for Selecting a Mutual Fund

23.  Fund performs poorly compared with
similar funds
 Perception of economic trends indicates
business cycle will smooth out soon
 Fund grows too rapidly or becomes too
large
 Fund taken over by new manager
 Investment goals become more
conservative
 Need cash
When To Sell

24. About Wayne Lippman
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Wayne Lippman has forty years of
experience in public accounting
including twenty years with Price
Waterhouse, where he served as a tax
partner in the San Francisco and
Oakland offices. He was previously
Managing Tax Partner of the Walnut
Creek office of Price Waterhouse.
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om