Investing in mutual funds

  • quick mutual fund data

    • total worldwide and US assets invested in open end funds

    • 54.9 trillion worldwide

    • 25.7 trillion US

    • Mutual funds:9414

    • ETFs:2175

  • Asset allocation

    • US equity funds: 43%

    • worldwide equity funds: 15%

    • bond funds:21%

    • money market funds:14%

    • other funds: 7%

  • Mutual fund

    • An investment vehicle that pools funds and buys assets with a specific investment objective, typically managed by a fund manager. This kind of investment can also be called an open end investement company or an open end fund

  • Fund or portfolio manager

    • the person or people responsible for an investimate fund

  • major reasons investors purchase mutual funds are

    • professional manager

      • managers can change’

    • Diversification

      • investors funds are used to purchase a variety of investimats

      • this variety provides some safety because of asset allocation

      • avoiding commission fees

        • might not be aplicable in this day and age

  • Open end funds

    • (90% of funds)

      • Shares are issued and redeemed by the investment company (Fidelity, Vanguard, etc) at the request of the investor

      • shares are not bought and sold among investors

        • you can still use a broker though

      • investors can buy and sell

  • price per share

    • Net Asset Value (NAV)

      • (value of the funds portfolio-liabilities)/number of shares outstanding

  • Mutual fund fees

    • Load fund

      • investors pay a commision (sales charge) up to 8.5% every time they purchase shares this is sometimes called a front load (class A shares)

      • average load charge is 3-5%

  • Management fee

    • charged yearly (0.5%-1% average) based on a percentage of the fund’s asset value

    • 12b-1 fees (class c shares)

      • annual fee for distribution and marketing cost of the fund

        • paid to finantial planners who sell the funds

      • cannot exceed 1% of a funds assets per year

      • <0.25% to be considered a no load fund

  • Expense Ratio

    • consists of the different management fees,12b-1 fee, and any other operating fees

    • this fee should not exceed 1 percent

      • varies by style or category

  • SWPPX

    • mutual fund