Explain the key reasons for purchasing mutual fund shares

Reference no: EM1348783

13.1 Ray's Dilemma: Common Stocks or Mutual Funds?
Ray Sutton has worked in the management services division of Strategic Consultants for the past 5 years. He currently earns a n annual salary of about %95,000. At 33, he's still a bachelor and has accumulated about $60,000 in savings over the past few years. He keeps his savings in a money market account, where it earns about 3% interest. Ray wants to get "a bigger bang for his buck" and so has considered withdrawing $50,000 from his money market account and investing it I the stock market. He feels that such an investment can easily earn more than 3%. Cheryl Dodd, a close friend, suggest that he invest in mutual fund shares. Ray has approached you, his broker for advice.

1. Explain to Ray the key reasons for purchasing mutual fund shares.
2. What special fund features might help Ray achieve his investment objectives?
3. What types of mutual funds would you recommend to Ray?
4. What recommendations would you make regarding Ray's dilemma about whether to go into stocks or mutual funds? Explain.

13.2 Jennifer Ponders Mutual Funds
Jennifer Hollins is the director of a major charitable organization in Lexington, KY. A single mother of one young child, she earns what could best be described as a modest income. Because charitable organizations aren't known for their generous retirement programs, Jennifer has decided it would be best for her to do a little investing on her own. She'd like to set up a program to supplement her employer's retirement program and, at the same time, provide some funds for her child's college education (which is still 12 yrs away). Although her income is modest, Jennifer feels that with careful planning she could probably invest about $350 a quarter, and she hopes to increase this amount over time. Jennifer now has about $15,000 in a bank savings account, which she's willing to use to kick off this program. In view of her investment objectives, she isn't interested in taking a lot of risk. Because her knowledge of investment extends no farther than savings accounts, series EE bonds, and a little bit about mutual funds, she approaches you for investment advice.

1. In view of Jennifer's long-term investment goals, do you think mutual funds are an appropriate investment vehicle for her?
2. Do you think she should use her $15,000 savings to start off a mutual fund investment program?
3. What type of mutual fund investment program would you set up for Jennifer? In your answer, discuss they types of funds you'd consider, the investment objectives you'd set, and any investment services (such as withdrawal plans) you'd seek. Would taxes be an important considerations in your investment advice? Explain.
4. Do you think some type of real estate investment would make sense for Jennifer? If so, what type would you suggest? Explain.

Reference no: EM1348783

Questions Cloud

Developing field in psychology : A developing field in psychology is called Positive Psychology, which is exploring ways to help people become happier and productive in life. Research the Internet to learn more about this type of psychology.

Mortgages and deeds related to one another : How are mortgages and deeds related to one another and they are two different methods to give a lender a security interest in real property of the debtor

What pressure does this correspond of mercury : An electronic device dissipating 30 W has a mass of 20g and a specific heat of 850 J/kgoC. The device is lightly used, and it is on for 5 min and then off for several hours, throughout which it cools to the ambient temperature of 25 o C.

Differentiating unix and window traceroute : Compare and contrast differences between Unix (or Linux) and Window Traceroute. All codes for each ICMP error message are not completely listed and explained.

Explain the key reasons for purchasing mutual fund shares : Ray Sutton has worked in the management services division of Strategic Consultants for the last five years. He currently earns and yearly salary of about 95,000.

How does governance play a part in developing trust : Explain how does governance play a part in developing trust and what approach discussed either in the lecture or in the text enhances a company's ethical standing?

Explain develop a simple mitigation plan for the potential : Explain Develop a simple mitigation plan for the potential security as well as fraud issues that might impact your e-business

Describe its corporate-level - business unit-level strategy : Select a multinational firm of your choice and describe its corporate-level and business unit-level strategies. Support your answer with relevant data.

Direct costing-allocation of costs-period cost : Costs may be allocated to a product or activity for many purposes, but care must be exercised when using allocated costs because:

User Account

All Pages