MUTUAL FUNDSGROUP MEMBERS:

Ashley Smith, Anissa Patterson, Alyssia Fernandez, Dacota Holder, Dakota Webb,

Jonathan Brooks, and Thomas Melton

*Background on Mutual Funds

*Stock Mutual Funds: Sell shares to individuals and invest the proceeds in stocks.

*Bond Mutual Funds: Sell shares to individuals and invest the proceeds in bonds.

NET ASSET VALUE

• NAV: the market value of the securities that a mutual fund has purchased minus any liabilities owed.

• The NAV is commonly reported on a per-share basis by dividing the NAV by the number of shares in the fund.

Open-End Versus Closed-End Funds

Open-end fund: sells shares directly to investors and purchase those shares whenever investors wish to sell them

Closed-end funds: issues shares to investors when the funds are first created, but do not re-purchase shares from investors.

Load versus No-Load Funds

No-Load mutual funds: sell directly to investors and do not charge a fee.

Load mutual funds: charge a fee when you purchase them

Types of Stock Mutual FundsGrowth funds: focus on stocks that

have potential for above average growth.

Capital Appreciation Funds: focus on stocks that are expected to grow at very high rates.

Small Capitalization Funds: Focus on firms that are relatively small.

Mid-Size Capitalization Funds: focus on medium size firms.

Types of Stock Mutual Funds (cont.)Equity Income Funds: focus on firms that pay a

high level of dividends.Balance growth and income funds: contain both

growth stocks and stocks that pay high dividends.

Sector Funds: focus on stocks in a specific industry.

Index funds: Mutual funds that attempt to mirror the movements of an existing stock index.

International stock funds: focus on firms that are based outside the United States.

Socially Responsible Stock Funds: screen out firms viewed as offensive by some investors.

Types of Bond Mutual Funds• Treasury Bond Funds: focus on investments and treasury

bonds.• Ginnie Mae Funds: invest in bonds issued by the government

national mortgage association.• Corporate Bond Funds: Focus on bonds issued by high quality

firms• High- Yield Bond Funds: focus on relatively risky bonds issued

by firms that are subject to default risks.• Municipal Bond Funds: invest in municipal bonds, attractive to

investors and high income tax brackets• Index Bond Funds: are intended to mimic the performance of

a specified bond index• International Bond Funds: bonds issued by non U.S. firms.

Dividend Distributions: A mutual fund that receives dividend payments must distribute these dividends to its investors in the same year.

Capital Gain Distributions: a mutual fund that realizes capital gains as a result of selling shares of stocks or bonds must distribute those capital gains to its investors in the same year.

Capital Gain from redeeming shares: You earn a capital gain if you redeem shares of mutual fund when the share price exceeds the price at which you purchased the shares

Capital Gain= (selling price per share-purchase price per share)

= ($30-$25) X $200 =$1000

Return and Risk of Mutual Funds