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【正文】 CHAPTER Fund Management 6 Chapter Objectives ? Explain the concept of mutual fund operation ? Explain various types of mutual funds ? Describe the various types of stock and bond mutual funds ? Describe the characteristics of money market funds Background on Mutual Funds ? Mutual funds offer a way for small investors to diversify when they could not do so on their own with the purchases of individual stocks ? Comparison to depository institutions ? Like depository institutions, mutual funds repackage proceeds from individuals to make investments ? Bank deposits are a liability contract, but a mutual fund represents partial ownership ? No federal insurance with mutual fund shares Background on Mutual Funds ? Mutual funds adhere to a variety of federal and state regulations ? Securities and Exchange Commission (SEC) regulates ? Funds must register and provide a prospectus to investors ?Disclosure since 1993 of manager’s name and length of time employed in that position ? Mutual fund itself is exempt from ine taxation if fund distributes 90 percent of taxable ine Background on Mutual Funds ? Mutual fund prospectus information includes: ? The minimum amount of investment required ? The investment objective of the fund ? The return on the fund over the past year, the past three years and the the past five years ? The exposure of the fund to various types of risk ? Services the fund offers ?Check writing ?Telephone or Inter funds transfer ? Management fees incurred that investors pay Background on Mutual Funds ? Estimating the asset value ? Net asset value is the value per share ? Estimated daily ?Determine the market value of all the securities in the fund ?Any interest or dividends added in ?Expenses subtracted ?Divide by the number of shares ?Dividends lower NAV ?NAV quotes Mutual Fund Distributions Mutual Fund Price Appreciation Capital Gains from the Sale of Securities in Fund Earned Ine from Dividends or Coupon Payments Background on Mutual Funds ? Mutual fund classifications depend on the type of securities the fund invests in and can include ? Stock or equity mutual funds ? Bond mutual funds ? Money market mutual funds ? Family of funds offered by investment panies ? Investor able to allocate then transfer funds among funds Exhibit Distribution of Investment in Mutual Funds S t o c k F u n d s $ 3 , 9 6 2 b i l l i o n 5 7 % B o n d F u n d s $ 8 0 8 b i l l i o n 1 1 % H y b r i d F u n d s $ 3 4 9 b i l l i o n 5 % M o n e y M a r k e t F u n d s $ 1 , 8 4 5 b i l l i o n 2 7 % Background on Mutual Funds ? Management of mutual funds ? Managers invest in a portfolio of securit
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