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Mutual Funds and The Stock Market Game

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A mutual fund is a collection of stocks, bonds and other securities owned by a ... funds, like mutual funds, are collections of securities managed by a ... – PowerPoint PPT presentation

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Title: Mutual Funds and The Stock Market Game


1
Mutual Fundsand TheStock Market Game
2
What is a Mutual Fund?
  • A mutual fund is a collection of stocks, bonds
    and other securities owned by a group of
    investors and managed by a professional
    investment advisory firm. This investment
    advisor (also called the mutual funds manager)
    collects money from many investors and invests
    the pool of money for all of them.

3
Mutual Fund Ownership in the U.S.
  • 96 million individual investors own mutual funds,
    and held 87 of the total mutual fund assets at
    year-end 2006.
  • 55 million households (about half of all US
    households) owned mutual funds at year-end 2006.

4
What Advantages Are There to Investing in Mutual
Funds?
  • Mutual funds provide professional management. The
    funds manager makes the buy and sell decisions,
    based on the funds management philosophy.
  • Mutual funds offer diversification. A mutual fund
    often invests in one hundred or more securities.

5
What Types of Funds are Available?
  • Mutual funds are also called open-end funds. This
    means that the fund will usually sell as many
    shares as investors want to buy.
  • Closed-end funds, like mutual funds, are
    collections of securities managed by a
    professional investment advisor. But unlike
    mutual funds, there are a fixed number of shares
    available and these shares are traded on the
    stock exchange.
  • Exchange-traded funds, are also like mutual funds
    in that they are collections of securities
    managed by a professional advisor, and like
    closed-end funds are traded on the stock exchange.

6
What Types of Mutual Funds are Available?
  • There are many types of mutual funds
  • Stock funds
  • Bond funds
  • Sector funds
  • International Funds
  • Money market funds
  • Hybrid funds (also known as balanced and life
    cycle funds)

7
How Do You Make Money on a Mutual Fund?
  • A mutual fund investor can make money in several
    ways
  • The fund earns income from interest or
    dividends on its investments which it
    distributes to its investors.
  • The fund produces capital gains by selling
    securities at a profit and distributes those
    gains to its investors.
  • You sell your shares of the mutual fund at a
    higher price than you paid for them.

8
Why Should Mutual Funds be a Part of The Stock
Market Game?
  • Investment companies as a whole are the largest
    investor in U.S. corporate stock, holding 25 of
    the outstanding stock of U.S. companies at the
    end of 2006.
  • The number of defined benefit plans has decreased
    to 42 thousand in 2006 from 170 thousand in 1985.
    Conversely, the number of defined contribution
    plans has increased to 450 thousand in 2006, up
    from 30 thousand in 1985.

9
Incorporating Mutual Funds Into The Stock Market
Game
  • Teachers can incorporate mutual funds into The
    Stock Market Game by talking about two important
    goals
  • Saving for college
  • Saving for retirement

10
Mutual Funds Role in Education Savings
  • Mutual funds accounted for 96 of the 90.1
    billion invested in Section 529 Plans at year-end
    2006.
  • Mutual Funds managed 5 billion in Coverdell ESAs
    (formally the Education IRA).

11
Mutual Funds Role in Retirement Savings
  • U.S. Retirement Assets Year-End 2006
  • 4.2 trillion in IRAs
  • 4.1 trillion in defined contribution plans
    (e.g., 401(k), 403(b), 457, and Keoghs)
  • 2.3 trillion in defined benefit plans
  • 3.0 trillion in state and local government
    employee retirement plans
  • 1.1 trillion in federal government defined
    benefit and Thrift Savings Plans
  • 1.6 trillion in annuity reserves

12
Mutual Funds Role in Retirement Savings
  • Of the 4.2 trillion invested in IRAs at year-end
    2006, about half (2 trillion) was invested in
    mutual funds.
  • Of the 4.1 trillion invested in defined
    contributions plans at year-end 2006, half (2.1
    trillion) was invested in mutual funds.

13
Mutual Fundsand TheStock Market Game
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