What are Mutual Funds? Quick Fact: As of June 2014, an estimated 100 million individuals in 75 million U.S. households owned mutual funds.

What are Mutual Funds?• Quick Fact: As of June 2014, an

estimated 100 million individuals in 75 million U.S. households owned mutual funds.

What is a Mutual Fund?

• Collection of stocks, bonds, and other securities owned by a group of investors.

• Managed by a professional investment advisory firm.

How does a Mutual Fund Work?

• This investment/advisor (also called mutual fund’s mgr.) collects money from many investors and invests the pool of money for all of them.

• Most Mutual Funds often invest in 100 or more securities (stocks, bonds, etc.).

• Mutual Funds can be very conservative or high risk.

What do the Fund Managers Do?• The mutual fund mgr. (and team of analysts) decides

which stocks and other securities to include in the mutual fund.

• Each day the fund’s manager and analysts evaluate the fund’s performance in the market.

• Look at how economic news might affect the fund.

• Decide which securities to keep or sell based on its investment strategy.

Advantages of investing in Mutual Funds?

• 24 hour – 7 days a week monitoring by a professional .

• Diversification – allows you to invest in many different securities.

• Helps you as an investor to balance your investment risk.

How do I make money on a Mutual Fund?

• The fund earns income from interest or dividends on its investments, and distributes it to you in an income distribution.

• The fund produces capital gains by selling securities at a profit, and distributes those capital gains to you, usually at year end.

• You sell your shares of the mutual fund at a higher price than you paid for them.

How is a Mutual Fund valued?

• NAV – Net Asset Value is what the value of mutual fund is called.

• If there is a mutual fund with a NAV of $12, then you can expect to buy into that fund for $12 per share plus any commission or sell it for $12 per share plus any commission.

• Nearly all funds compute their NAVs daily– typically at the end of the day based on the value of the

securities in their portfolios.

How is the NAV calculated?

• A mutual fund’s NAV is the current market of all of its investments, minus its liabilities, and divided by the total number of outstanding shares.

NAV = Current Assets – Liabilities / # of outstanding shares

What is a Mutual Fund family?

• A family of Mutual Funds is a group of funds usually having the same investment advisor.

• The family of funds will often include many different types of stock funds, bond funds, international funds, etc.

How do you find Mutual Funds…do they have ticker symbols?

• When researching mutual funds, you will find that the ticker symbols are usually 5 letters long and end with an “X” (e.g., FBGRX, SNXFX, BLUEX).

• There are many commercial web-sites that provide Mutual Fund information.

• The Investor Research link in your Stock Market Game portfolio also allows you to research mutual funds.

Researching Mutual Funds

Always do your research before you invest, in anything.

Read the mutual fund’s prospectus!!

The Prospectus

A document that explains key information about a fund, including the fund’s;

• Investment Objective and Policies• Performance• Fees and Expenses

All mutual funds will have a prospectus.

Investment Objective and PoliciesInvestment Objective and Policies – section tells what the goals of the mutual fund are and how it plans to reach those goals.

I.E. – is it a Growth, Income, Low Risk fund –

What type assets is the fund investing in (stocks, bonds, money markets, etc…)

What asset sector is the fund investing in (large cap or small cap companies, international or domestic companies)

Performance

Provides information on how the mutual fund has performed, on average, for the past one, five and 10 years.

While you should not judge a fund totally on past performance, this information can show how consistently the fund has performed.

Fees & Expenses

It cost money to manage a fund.

All funds must disclose their fees and expenses.

You will find this information in the fund’s prospectus.

Finding A Fund’s Prospectus

Fund’s management company’s website

Most commercial websites – Yahoo! Finance, Bloomberg.com, etc…

SEC’s EDGAR database – www.sec.gov/edgar.shtml

Contact a broker