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Investing 101: Mutual Funds

This document provides an overview of mutual funds and investing basics. It defines mutual funds as a way to pool money from many investors which is then invested in stocks and bonds by an investment company or fund manager. The main types of mutual funds are bond funds, equity funds, balanced funds, and money market funds. While mutual funds provide benefits like diversification and professional management, they also have costs and risks. It's important to understand your investment goals and risk tolerance when choosing a mutual fund. The document concludes by answering common questions about mutual funds.

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181 views40 pages

Investing 101: Mutual Funds

This document provides an overview of mutual funds and investing basics. It defines mutual funds as a way to pool money from many investors which is then invested in stocks and bonds by an investment company or fund manager. The main types of mutual funds are bond funds, equity funds, balanced funds, and money market funds. While mutual funds provide benefits like diversification and professional management, they also have costs and risks. It's important to understand your investment goals and risk tolerance when choosing a mutual fund. The document concludes by answering common questions about mutual funds.

Uploaded by

josine.conti5913
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Investing 101: Mutual Funds

What to expect
Josine expert Boring Technical jargon Basics only, simplified version Mutual funds only Long term

Outline
Investing 101 What are mutual funds Types of Funds The Costs Picking a Mutual Fund FAQs

What is investing?

Investing
The act of committing money or capital to an endeavor with the expectation of obtaining an additional income or profit. Putting your money to work for you

What investing is NOT


a get-rich-quick scheme gambling

Why invest at all?

When?

NOW!

Why invest now?


Principle of compounding
Year 1 2 3 4 n start end 1 2 2 4 4 8 8 16 $ $$$$!

Jack
15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 38 39 40 41 42 43 44 45 30,000 30,000 30,000 30,000 30,000 30,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Jill
0 0 0 0 0 0 0 0 0 0 0 0 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 46 47 48 49 50 51 52 53 54 56 57 58 59 60 61 62 63 64 65

Jack
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Jill
30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000

Total Amount Investment: Jill: P1.17Million Jack: P150T Total Retirement Money if it Grew at 20% A Year Jill: P220M Jack: P1 Billion

Types of investments
Bonds
fixed-income virtually risk free if stable

Stocks
ownership of an entity, including profits, volatile

Alternative
FOREX, gold, real estate

Mutual Funds

What are mutual funds?


Done by pooling money from many people which is then invested on stocks and bonds

Investment company / fund manager

How mutual funds work

Mutual Funds

Advantages Diversification Professionally managed Relative liquidity Affordability Simplicity Convenience Less emotional stress

Disadvantages Costs Fund managers may fail Lack of control Price uncertainty No guaranteed returns Not insured

Types of funds
Bond Fund moderate returns, low risk
Government bonds

Equity Fund - high growth, moderate to high risk


Stocks, erratic but performs better historically

Balanced fund moderate returns, moderate risk


Combination of stocks and bonds

Money market low returns, low risk


Treasury bills, short term investments

The Costs
Sales load Administrative costs

Factors to consider
Performance of the fund and the rate of returns Investment psychology of the mutual fund Risk adjustment Fund management Mutual fund fees

Picking a mutual fund


Identify goals. Know your investment objectives.
short-term, money market funds A few years in the future, bond funds long-term goals, stock funds

Identify your investment risk

All funds carry some form of risk!

Precautions
Mutual funds are an excellent idea in theory, but, in reality, they haven't always delivered It is not the universal solution to all investment needs

Past performance does not predict future returns

Remember!
Before you invest, be sure to read a fund's prospectus and shareholder reports to learn about its investment strategy and the potential risks.

NAV (net asset value) is the value of the fund's assets minus its liabilities. You can think of it as the price of the fund. If this is high, it is not necessarily true that its the best fund.

Remember!
Dont panic! Stick to your plan.

Example

Example

FAQs
Question 1: Is there a possibility that I will lose money in investing in Mutual Funds?

FAQs
Question 2: How much interest does a mutual fund offer to its investors?

FAQs
Questions 3: Are the gains in Mutual Fund taxable?

FAQs
Questions 4: Where will the Mutual Fund invest my money?

FAQs
Question 5: How long do I need to invest my money on a Mutual Fund?

FAQs
Question 6: What if the fund manager is incompetent and does not perform well?

FAQs
Question 7: What if the fund manager will run away with my money?

FAQs
Question 8: How will the fund manager earn from my investment and how much?

FAQs
Questions 9: What if I die unexpectedly? What will happen to my investment?

Q&A

Whats the trick?

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