A Mutual Fund Is a Financial Vehicle That Purchases

Mutual Funds

A mutual fund is a financial vehicle that purchases

______

Where do you buy them? At a ______or through a ______

Average (not rich) people buy into a mutual fund because then they can

______thereby increasing their buying power.

A diversified portfolio is when you own part of ______.

Mutual funds allow people of modest means to have a diversified portfolio.

How do mutual funds work?

Investors: ______

Managers: ______

Returns: ______

Here we come to one of the most basic differences:

Actively Managed Funds have a ______buy and sell

Index Funds are "passive" funds, automatically purchased and sold to mimic

______

Here are a couple of indexes to give you an idea of what an index fund might contain.

S&P 500: Standard and Poors 500 is a stock market index of ______that havestocks on the NYSE or NASDAQ. The value is based on market-caps.

Another well-known index is theDow Jones Industrial Average aka the Dow. The Dow tracks 30 big companies. The number for the Dow is determined by the aggregate ______on those stocks.

The limits in the following categories vary according to what firm you ask: these numbers are the ones we will use in this class, and are generally acceptable.

Remember “market capitalization from the “How to Read a Stock Table” lecture? The market cap is determined by multiplying the value of a share by the number of shares.

Large Cap, aka Big Cap = market capitalization value of more than ______

At 255.90B, Johnson and Johnson is an example of a Large Cap company

Mid-Cap = market capitalization between ______and ______billion

Small-Cap = between ______million and ______billion. They have the greatest potential for growth, but are______.

Growth funds buy shares of______.

Sector funds buy shares of companies in ______, such as technology or oil.

There are funds for large or small cap companies, socially responsible companies, high or low risk, emerging markets, blends...

If you can think of it, there's probably a fund geared to it.

Good reasons to buy mutual funds:

______of investment

______of having holdings picked for you

it's fairly ______

you can set up an ______re/investment plan

Good reasons to avoid mutual funds:

You don’t ______are in your fund

the money isn't ______

______

What is an Exchange Traded Fund (ETF)?

An ETF trades on a stock exchange just like an actual stock; however, it is like a mutual fund because it is a ______

An ETF, like mutual funds, has a theme. It could be an index, a specific industry or even a ______.

Examples of ETFs: XBI is composed of select S&P bio-tech firms.

VWO is composed of international firms in a variety of industries, based on an index from the London Stock Exchange.