Mutual funds offer convenience, diversification, and the services of professional money managers and

Mutual funds offer convenience,
diversification, and the services of professional money managers and analysts.
Mutual funds can be particularly appealing for small investors who don’t have a
lot of money and for those who are new to investing. This project will help you
learn more about the various types of mutual funds and how to pick the funds
that best suit your investment objectives.

Assume that you’ve just received a windfall
of $25,000 and would like to invest it all in mutual funds. There are several
ways to classify mutual funds, but for this project, we will consider the
following
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Mutual funds offer convenience,
diversification, and the services of professional money managers and analysts.
Mutual funds can be particularly appealing for small investors who don’t have a
lot of money and for those who are new to investing. This project will help you
learn more about the various types of mutual funds and how to pick the funds
that best suit your investment objectives.

Assume that you’ve just received a windfall
of $25,000 and would like to invest it all in mutual funds. There are several
ways to classify mutual funds, but for this project, we will consider the
following eight categories:

•             Growth

•             Value

•             Equity–income

•             Bond

•             Balanced

•             Index

•             Socially responsible

•             International

Pick three or four categories that you believe
best meet your financial needs and risk tolerance, and then select one fund
from each category. You are strongly encouraged to use some of the online
sources and other references mentioned in this chapter to help you make your
selections. For each fund, find the following information:

a. Name of fund, its ticker symbol, the
fund manager, and the tenure of the fund manager.

b. Category and size of the fund—try to
find the Morningstar style box.

c. Loads, fees, and other charges; minimum
investment required.

d. Performance of the fund over the past
one, three, and five years. Compare the fund’s performance to at least two or
three other funds in its category and to an appropriate index over these same
periods.

e. How much did the fund pay out last year
in dividends and in distributions of short- and long-term capital gains?

f. What was the approximate yield on the
fund last year? (You may have to compute this yourself; use the approximate
yield formula or a handheld calculator after finding its price one year ago
from a source such as http://finance.yahoo.com.)

g. What services does the fund offer, such
as automatic reinvestment plans or phone switching?

h. Briefly explain why you selected the
fund and how it meets your investment objectives.

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