Mutual funds are an easy, convenient way to invest, without having to worry about choosing individual stocks. A mutual fund can be defined as a single portfolio of stocks, bonds, and/or cash managed by an investment company on behalf of many investors. The investment company manages the fund, and sells shares in the fund to individual investors. When one invests in a mutual fund, they become a part-owner of a large investment portfolio, along with all the other shareholders of the fund. The fund manager invests the contributions when shares are purchased, along with money from the other shareholders. Every day, the fund manager counts up the value of all the fund's holdings, figures out how many shares have been purchased by shareholders, and then calculates the net asset value(NAV) of the mutual fund, which is the price of a single share of the fund on that day. If the fund manager is doing a good job, the NAV of the fund will usually get bigger and the shares will be worth more.
There are a couple of ways that a mutual fund can make money in its portfolio. A fund can receive dividends from the stocks that it owns. Also, the fund might have money in the bank that earns interest, or it might receive interest payments from bonds that it owns. At the end of the year, a fund makes another kind of distribution, this time from the profits they might make by selling stocks or bonds that have gone up in price. Unfortunately, funds don't always make money. For example, the fund manager could have made some investments that didn't work out, sold some investments for less than the original purchase price, and there may be some capital losses.
Most mutual funds invest in stocks, and these are called "equity funds." Some funds specialize in investing in large-cap stocks, others in small-cap stocks, and mid-cap stocks. Large-cap stocks have market caps of billions of dollars, and are the best-known companies in the U.S. Small-cap stocks are worth several hundred million dollars, and are newer, up-and-coming firms. Mid-caps are somewhere in between. There are also bond funds that purchase bonds issued by corporations, municipal governments, or the federal government agencies. You can invest in tax-free bond funds, just as you can buy tax-free bonds, and the interest you earn is exempt from federal a...
... middle of paper ...
...nd some of the advantages and disadvantages mentioned earlier I found a fund that was interesting. The Domini fund only invests in companies that are part of the Domini Social Index. The index excludes companies that derive more than 2% of sales from military weapons, sell any alcohol or tobacco or own interest in nuclear power plants. The remaining large-cap stocks are then evaluated according to other social criteria: diversity, employee relations, the environment and the product. For example, a company may give a lot of money to community organizations but may be rabidly polluting the environment. In a situation like this, the analyst will carefully consider the pros and cons before including the company in the index and in the fund. Investment requirements were also a factor for considering this fund and the Domini fund requires a minimum initial investment of $2,000. However, the company can waive the minimum investment to a mere $25 each month. The fund has been around since 1991 and has had an average annual return of 20.61% for the last 8 years. It returned 32.99% in 1998 (while the S&P500 returned 28.58%). It invests 25.85% of its assets in technology and is no load.
Student Answer: Professional management and diversification are the major reasons investors purchase mutual funds, as well as they are easy to invest in for beginning investors or those who lack large amount of money as required by other types of investments. Investment companies are employed with experienced and profession fund managers who research and devote a lot of time to finding the perfect securities for their investment portfolios. The diversification allows for gains, even in a loss, because one investment in a mutual fund can offset the loss of another by it’s gains. Basically, your investments are scattered around and offer somewhat of a safety net for your
The three companies chosen for this evaluation range from a foundation whose entire existence is based on helping people to a corporation who is basically a monopoly for power in several U.S. states and whose #1 goal is profit.
The private equity funds are heavily focused on alternative energy, clean technology and healthcare. The Willamette University Endowment has direct primary exposure to these sectors through the Cadent Energy Fund, TCW European Clean Energy Fund and Pinnacle Ventures Equity Fund. These three funds are approximately 30% of Willamette’s committed capital, and do not include indirect and secondary exposure to these industries through the other seven fund-of-funds. Overall, the portfolio has a heavy concentration in the alternative and clean energy sectors. This focus is also a recurring theme in the fund-of-funds. In addition, there is minimal exposure to consumer staples, financial, industrials and materials.
One has to work hard to consider their values in particular issues and how strongly they feel. This is the choice many people make when they invest in mutual funds, and have no idea where their mutual funds are invested. Many vocal opponents to shopping at Wal-Mart might discover they hold investments in the Wal-Mart. There are 1050 mutual funds that are invested in Wal-Mart, some of the largest mutual funds in the world. There are many people who have no idea where their investments lie. If you want to be true to your value against shopping at Wal-Mart, you need to be careful to remove yourself from investments that support Wal-Mart. You have to review your investments and find out where your money is invested.
There are many different ways to save money and there are different things to save for. A savings plan for an immediate want is apparently different than a savings strategy for retirement. One may choose to select stocks, bonds, or mutual funds for a savings strategy, however, my personal choice is to invest in bonds first, then mutual funds.
This case discusses the unique value proposition of Dimensional Fund Advisors (DFA), which used academic research to create specialized portfolios focused on Small Capitalization companies. Their investment philosophy particularly focused on research by Fama and French and Banz. They researched how small cap companies tend to outperform large cap companies over time. In addition, FDA created an additional competitive advantage by created trading efficiencies to reduce transaction cost.
The stock market is a vehicle to invest money. It is where consumers buy and sell fractions of companies, and is referred to as stocks. A proven method to achieve wealth while keeping up with inflation, comprised of publically held companies who offer goods and services that are used by the general public daily. Companies sell stocks to public investors in a free and open market environment on a daily basis, which is an effective strategy to build a sound financial future.
My God there are so many careers out there, who in the world can pick just one. That’s what’s been weighing on my mind heavily is what career is right for me. I’ve thought of a couple that interest me but I want to find out everything there is to know about a financial advisor. The reason that I’m interested in this field is how everything is the same when it comes to the actually math behind the career. Also I like to deal with people and money so a job as a financial advisor just seems right for me but I intend to find out as much as I can to make sure there’s nothing surprising or any kinks in what sounds like the perfect job for me.
William Sharpe, Gordon J. Alexander, Jeffrey W Bailey. Investments. Prentice Hall; 6 edition, October 20, 1998
The following essay will expand on the usefulness and flaws of CAPM and other asset evaluation frameworks and in the end showing that despite all the evidence against CAPM it is still a useful model for determining asset investments.
As an investor with several types of securities, I am looking for long-term stability towards a retirement fund. The combination of several different stocks and mutual funds allows for the safety of the investments. By investing long-term in different accounts, I have the ability to gain more in the long-run with less risk of not lose all my savings on one investment.
... IRA. The retirement account is rolled over to an allocated gold account. This is a wise move to secure retirement earnings because the funds cannot be touched by employers in case the investor decides to leave his or her job.
The stock market is an essential part of a free-market economy, such as America’s. This is because it provides companies the capital they need in exchange for giving away small parts of ownership in their company to investors. The stock market works by letting different companies sell stocks to gain capital, meaning they sell shares of their company through an exchange system in order to make more money. Stocks represent a small amount of ownership in a company. The more stocks a person owns, the more ownership they have of that company. Stocks also represent shares in a company, which are equal parts in which the company’s capital is divided, entitling a shareholder to a portion of the company’s profits. Lastly, all of the buying and selling of stocks happens at an exchange. An exchange is a system or market in which stocks can be bought and sold within or between countries. All of these aspects together create the stock market.
It should be noted that all real estate agents and brokers operate under a strict procedural and ethical code monitored by the real estate commission. many of the rules and regulations come from the U.S. senate, and the state of Idaho, and must be strictly adhered to. Agents who fail to follow these regulations shall be, and frequently are, fined or have their license revoked
Never have I ever climbed a mountain peak. As a child, I imagined myself conducting expeditions in deep-frozen pathways, leading amateur explorers to the top of the world, and instructing rookies in surviving harsh blizzards. Even though slightly altered, my childhood dream has been achieved. I led a team of fellow classmates, in my Strategic Management course, to the success summit of a financial competition. Over the course of a semester, I and my teammates were supposed to create and manage a company of the IT industry, in a computer-simulated environment, along with other four rival teams. I dealt with strategy and financial matters of our virtual enterprise, while my colleagues were working on marketing and manufacturing. During the four months of the exercise, I have experienced finance from various aspects: capital budgeting, through selecting favorable investment for upcoming quarters; debt management, by assessing the necessary amount and efficiency of loans; profitability analysis and dividend policy, which had been used to compile the company’s general performance index. Working in a multinational team, which included an American, a Norwegian and a Moldovan, strengthen my negotiations skills, as well as flexibility and cooperation. But above all, this experience intensified my passion for finance. Of course, a pleasant bonus was the fact that, in the end, our company’s financial performance was six times the performance of second-best team.