Personal Finance Chapter 17

Funds that sell shares to individuals and invest the proceeds in stocks

Funds that sell shares to individuals and invest the proceeds in bonds

§Low initial investment §Expertise of portfolio manager §To meet specific investment goals

The market value
of the securities that a mutual fund has purchased minus any liabilities owed§Usually reported on a per share basis

Funds that sell shares directly to investors and repurchase those shares whenever investors wish to sell them
Usually managed by investment companies that are subsidiaries of a large financial conglomerate

: mutual funds that sell shares to investors but do not repurchase them; instead fund shares are purchased and sold on stock exchanges

The amount by which a closed-end fund’s share price in the secondary market is above the fund’s NAV

The amount by which a closed-end fund’s share price in the secondary market is below the fund’s NAV

Funds that sell directly to investors and do not charge
a fee

Funds whose shares are sold by a stockbroker who charges a fee (or load) for the transaction§Loads can have significant impact on their investment performance

The annual expenses
per share divided by the net asset value of a mutual fund§Average expense ratio is 1.5 percentØMutual funds incur expenses for administrative, legal, and clerical expenses as well as portfolio management fees

ØFunds with lower expense ratios tend to outperform other funds

Mutual funds that focus
on stocks that have potential for
above-average growth

Mutual funds that focus on stocks that are expected to grow at a very high rate

Mutual funds that focus on firms that are relatively small