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Mutual Fund Research Assignment

There are thousands of mutual funds that could be used to fund your investment plans. If you want to select a fund for an IRA, SEP or other self-directed retirement plans you will need to start somewhere. There are many web sites that help investors narrow the very large number of mutual funds to a number that is more manageable. In using an investment web site the first step in choosing a mutual fund is to “screen” the full data basis of mutual funds using several criteria. The site will then provide a list of mutual funds that fit your criteria and from there you can more closely examine funds and narrow down the possible choices. At that point you could request a prospectus from the mutual fund Company and eventually select a fund that can be used to fund your IRA, SEP etc.

The Week IX assignment provides a link to one web site that can be used as a screening tool and also provides in depth research of funds. This site is Morningstar.com. There are many other good sites but if you use the Morningstar site the following instruction can be used to complete the assignment. If you want to use another site the site instructions will not be the same, but if it has a fund screening or search feature you should be able to complete the assignment. The assignment is due by next class period. Read through steps below before starting the assignment.

1.  After accessing www.morningstar.com select “funds” then “fund screener” from the toolbox.

2.  Scroll down the list of screening fields and enter criteria that are important to you. You can always leave the field in the default. If your criteria are too stringent you may end up screening out all the mutual funds from the data base, so only enter criteria that are important to you. I am only defining two criteria. I am requiring that you select “no-load” funds and funds that require only a minimum investment of $3,000 as this is the highest amount that can be put yearly into an IRA. You will determine any additional criteria.

3.  At the end of all the fields select “show results”.

4.  If you find the results give you approximately 8-12 funds - congratulations. If the list was less than 8 change your criteria to make the search broader. If you had more than 12 results narrow the criteria. Keep changing the criteria until you get approximately 8-12 funds.

5.  Print, from the site, your list of approximately 6-12 funds and the search criteria you used. You will use this print out while completing step 6.

6.  Now try to narrow your list to 4 or 5 funds by reading through the results and mark an X (on your printed copy) through any fund that you might want to eliminate. Make a comment on the print out why you are eliminating it. This list with your comments will be turned in with assignment.

7.  Use pages 2 and 3 of this assignment to list these funds.

Student’s Name______

List the names of the 4 or 5 funds that you think are possible candidates for your final selection. Use the following spaces as needed. There will be additional instructions on page 4.

A.______

B.______

C.______

D.______

E.______

·  Using the web site click on the name of each fund to obtain more detailed information about the fund. There is a summary sheet for each fund and links to more in depth information. Use all the tools available that you understand and while reading through the information make notes on your assignment paper about those items of interest that might influence your purchase decision. If there is not enough space add paper as needed. At this point you might want to eliminate some more of your choices and if so put an X through the name on the paper and briefly explain why it is being eliminated. You should definitely eliminate any municipal bonds funds that you might have included since they are never appropriate for tax advantaged retirement plans. You might find other funds that you think are exceptionally good choices and those can be starred. Because the fund is for a retirement plan and you have several decades before retirement most advisors suggest a heavy weighting in stocks rather than bonds.

·  Review your fund list and narrow it down to just 2. List those fund names below and a brief comment on why the funds were selected. I would also like you to print out the summary page from the morningstar site (or which ever site you used) on these 2 choices. Finally, be prepared to make a brief presentation to the class on your choices. (Make it clear to the class what you were looking for in a fund and what it is about the fund that you found attractive. Part of your grade will be based upon the quality of the presentation. If you want me to make an overhead transparency or handout of material let me know and I will make copies for you. Just give me enough time. This is not something you are required to do. I am just letting you know of this option.

A.

B.

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