TAILIEUCHUNG - Charles J. Corrado_Fundamentals of Investments - Chapter 4

CHAPTER 4 Mutual Funds More than 8,000 different mutual funds are available to United States investors. Incredibly, this is about the number of different stocks traded on the Nasdaq and the New York Stock Exchange combined. There are funds for aggressive | CHAPTER 4 Mutual Funds More than 8 000 different mutual funds are available to United States investors. Incredibly this is about the number of different stocks traded on the Nasdaq and the New York Stock Exchange combined. There are funds for aggressive investors and conservative investors short-term investors and long-term investors. There are bond funds stock funds international funds you-name-it funds. Is there a right fund for you Let s see As we discussed in an earlier chapter if you do not wish to actively buy and sell individual securities on your own you can invest in stocks bonds or other financial assets through a mutual fund. Mutual funds are simply a means of combining or pooling the funds of a large group of investors. The buy and sell decisions for the resulting pool are then made by a fund manager who is compensated for the service provided. Since mutual funds provide indirect access to financial markets for individual investors they are a form of financial intermediary. In fact mutual funds are now the second largest type of intermediary in the United States. Only commercial banks are larger. Mutual funds have become so important that we will devote this entire chapter to them. The number of funds and the different fund types available have grown tremendously in recent years. Indeed 37 percent of . households held mutual fund assets in 1997 which is up markedly from only 6 percent of . households in 1980. One of the reasons for the proliferation of mutual funds and fund types is that mutual funds have become on a very basic level consumer products. They are created and marketed to the public in ways that are intended to promote buyer appeal. As every 2 Chapter 4 business student knows product differentiation is a basic marketing tactic and in recent years mutual funds have become increasingly adept at practicing this common marketing technique. Investment Companies and Fund Types At the most basic level a company that pools funds obtained

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