1 Bodie Kane Marcus Essentials of Investments Fourth
1 Bodie • Kane • Marcus Essentials of Investments Fourth Edition Chapter 4 Mutual Funds and Other Investment Companies Irwin / Mc. Graw-Hill © 2001 The Mc. Graw-Hill Companies, Inc. All rights reserved.
2 Bodie • Kane • Marcus Essentials of Investments Fourth Edition Services of Investment Companies • • Administration & record keeping Diversification & divisibility Professional management Reduced transaction costs Irwin / Mc. Graw-Hill © 2001 The Mc. Graw-Hill Companies, Inc. All rights reserved.
3 Bodie • Kane • Marcus Essentials of Investments Fourth Edition Net Asset Value • Used as a basis for valuation of investment company shares – Selling new shares – Redeeming existing shares Calculation Market Value of Assets - Liabilities Shares Outstanding Irwin / Mc. Graw-Hill © 2001 The Mc. Graw-Hill Companies, Inc. All rights reserved.
4 Bodie • Kane • Marcus Essentials of Investments Fourth Edition Types of Investment Organizations • Unit Trusts • Managed Investment Companies – Open-End – Closed-End • Other investment organizations – Commingled funds – REITs Irwin / Mc. Graw-Hill © 2001 The Mc. Graw-Hill Companies, Inc. All rights reserved.
5 Bodie • Kane • Marcus Essentials of Investments Open-End and Closed-End Funds: Key Differences Fourth Edition Shares Outstanding • Closed-end: no change unless new stock is offered • Open-end: changes when new shares are sold or old shares are redeemed Pricing • Open-end: Net Asset Value(NAV) • Closed-end: Premium or discount to NAV Irwin / Mc. Graw-Hill © 2001 The Mc. Graw-Hill Companies, Inc. All rights reserved.
6 Essentials of Investments Bodie • Kane • Marcus Fourth Edition Investment Policies • • Money Market Fixed Income Equity Balance & Income Asset Allocation Indexed Specialized Sector Irwin / Mc. Graw-Hill © 2001 The Mc. Graw-Hill Companies, Inc. All rights reserved.
7 Essentials of Investments Bodie • Kane • Marcus Fourth Edition Costs of Investing in Mutual Funds • Fee Structure – Front-end load – Back-end load • Operating expenses • 12 b-1 charges – distribution costs paid by the fund – Alternative to a load • Fees and performance Irwin / Mc. Graw-Hill © 2001 The Mc. Graw-Hill Companies, Inc. All rights reserved.
8 Bodie • Kane • Marcus Essentials of Investments Sources of Information on Mutual Funds • • • Fourth Edition Wiesenberger’s Investment Companies Morningstar Investment Company Institute Popular press Investment services Irwin / Mc. Graw-Hill © 2001 The Mc. Graw-Hill Companies, Inc. All rights reserved.
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