Lessons: Chapter 14 - Understanding Mutual Funds


Important Links

You can get mutual fund information on many financial websites. We often use the following sites :

YahooFinance 

MarketWatch

 

Article on expense ratios: Expense Ratios


Assignments

14.1: True or False. A mutual fund can be described as an investment in a collections of stocks, bonds, or other financial instruments

14.2: True of False. Mutual funds have their own stock symbols just like stocks

14.3: A fund's portfolio manager is responsible for which of the following activities:

  1. Selling and substituting the securities in the mutual fund

  2. Filing taxes on your behalf associated with your profit in the mutual fund

  3. To guarantee that you do no loose any money in the mutual fund investment

14.4: The annualized total return is one way mutual funds do which one of the following choices:

  1. Show how well they have performed financially in the past

  2. Show how well they will perform in the future

14.5:  Mutual funds can be a good way to invest in stocks and bonds for which of the following reason:

  1. Because a mutual fund buys and sells large amounts of stocks and bonds (and other financial assets) at a time, its costs are often higher than what you would pay on your own

  2. By owning shares in a mutual fund instead of buying individual stocks or bonds directly, you spread out your investment risk. 

  3. Mutual funds can guarantee the amount of money you can make in your investments. 

14.6: The Net Asset Value per share or NAV can best be described as which of the following:

  1. The total amount of money the mutual fund has borrowed divided by the number of people who own shares in the mutual fund

  2. The total value of the fund's assets divided by the number of people who own shares in the mutual fund

14.7: The money market fund is a special type of mutual fund that invest only in:

  1. High risk and long-term investments

  2. High quality short-term investments

  3. Real estate investments

14.8: Which one of these items is not true about a mutual fund classified as an index fund:

  1. The fund offers returns similar to returns of an index such as the Dow Jones or the S&P 500

  2. The fund offers returns similar to a particular stock within an index such as the Dow Jones or the S&P 500

14.9:  One of the reasons that mutual funds are not always Teenvestor-friendly is that:

  1. Mutual funds require a portfolio manager

  2. Mutual funds often require investments of $1,000 or more

  3. Mutual funds often invest in a diversified pool of stocks and bonds

14.10: A fixed income fund is a fund related to one of the following:

  1. Stocks

  2. Bonds

  3. Mortgages

14.11:   A prospectus is which of the following:

  1. A document which  contains information about costs, risks, past performance, and the fund’s investment goals

  2. An special type of investment in stocks

14.12: True or False. A mutual fund sales load represents the commission buyers of mutual funds pay to those who help them buy the funds

14.13: True or False. A front-end load is a type of sales load you pay when you sell your mutual fund

14.14: True or False. A back-end load is a type of sales load you pay when you buy mutual fund

14.15: True or False. Besides a sales load, funds also charge other fees called an expense ratio for managing the fund.

14.16: True or False. The 12b-1 fee is a marketing and distribution fee charged by mutual funds included as part of the expense ratio

14.17: True or False. The higher the sales load and expense ratio, the higher your returns on your mutual fund investment

14.18: Log into MarketWatch and enter the mutual fund symbol, VITSX, in the search box. VITSX is the Vanguard Total Stock Market Index Fund which is one of the biggest index mutual funds.  Please list the following:

  1. The NAV of the fund

  2. Total net assets of the fund

  3. The expense ratio of the fund

  4. The 5-year average annual return

> Answers to Chapter 14 Assignments