Ch. 15: Investing Through Mutual Funds

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Ch. 15: Investing Through Mutual Funds by Mind Map: Ch. 15: Investing Through Mutual Funds

1. Mutual fund

1.1. an investment company that pools funds by selling shares & makes diversified investments

1.2. portolio

1.2.1. combined holdings of a mutual fund

1.3. net asset value

1.3.1. per share value of a mutual fund

1.4. mutual fund dividend

1.4.1. income paid to investors based on profits from firms in the fund

1.5. capital gain distribution

1.5.1. capital gains - capital losses

1.6. unique services

1.6.1. automatic reinvestment reinvest dividends & capital gains

1.6.2. exchange privilege can swap shares in 1 fund for shares in another fund

1.6.3. beneficiary designation designate beneficiary to avoid probate court

1.6.4. withdrawal options can pull out $ on a regular basis

2. Mutual fund types

2.1. 3 categories:

2.1.1. income money market fund highly liquid safe short maturity, < 1 year bond funds invest in bonds & stocks with high dividends

2.1.2. growth aggressive growth seek the greatest long-term capital appreciation growth invests in companies with higher than average revenue & growth growth & income invests in companies with dividend income & price appreciation value invests in sound companies with low prices

2.1.3. income & growth balanced funds keeps a set mix of stocks & bonds asset allocation funds invests in stocks, bonds, cash equivalents, international assets, gold, real estate target-date retirement funds allocation of stocks, bonds, cash allocation based on age & risk tolerance

3. Mutual fund fees & charges

3.1. load funds

3.1.1. load is the commission paid to broker in 3%-8.5% range

3.1.2. types front-end load paid when bought back-end load paid when shares are sold no-load can purchase at net asset value without a sales charge deliver higher returns