Investing in Mutual Funds or Real Estate Chapter 14 Notes

1. Investing in Mutual Funds or Real EstateChapter 14 Notes Mutual Funds • This is the most popular investment alternative out there! Here are the basics: • _______________________________________________________________________________________ __________________________________________________________________________________. • The investment company that manages the fund ______________________________________________ ____________________________. They charge a _____________________________ for their services. • Professional fund managers buy and sell based on the ______________________________________ and ______________________________________________. Why Investors Purchase Mutual Funds • ________________________________________! • You don’t have to worry about following the stock and bond markets, or about looking for hot new investments. Professionals are doing the work for you. • ________________________________________! • When you invest in funds, you are diversifying because mutual funds purchase numerous and diverse stock and bond issues. • ________________________________________! • You can turn your money into cash whenever you need it (unless, of course, the fund is part of some type of retirement account). • ________________________________________! • You can get a great rate of return without as much risk as you would have with investing in individual stocks. Types of Mutual Funds • Individual funds have different investment goals and strategies. You should choose funds that have goals and strategies that match your own. • There are many different types of funds to choose from including: Growth, income, balanced, bond, global and index funds. • Growth Funds • A ___________________________________________________________________________ _________________________________. They are considered more risky but can really hit big. • An ____________________________________________________________________________. These are even more risky but can lead to massive returns if they hit. • Examples of some of the top growth funds can be seen at: http://www.marketwatch.com/tools/mutualfunds/100index.asp?tf=9&view=2&siteid=mktw • http://www.marketwatch.com/tools/mutualfunds/overview.asp?siteid=mktw&symb=FMILX&sid=9964 Income Funds • An _____________________________________________________________________________________ ________________________________________________________________________________________. • The goal of these types of funds is current dividend income. _______________________________________ ___________________________________. • Sometimes you see combination funds like a Growth-income fund. For example, the managers of this type of fund will be looking for companies that are growing AND paying dividends. • For examples of some of the top performing index funds check out: http://www.marketwatch.com/tools/mutualfunds/100index.asp?tf=9&view=37&siteid=mktw

2. Investing in Mutual Funds or Real EstateChapter 14 Notes Balanced Funds • A ___________________________________________________________________. ____________________ __________________________________________________________________________________________. • Balanced funds are generally considered ____________________________________________. • The goal of the fund is to ______________________________________________________________________. • For an example of a balanced fund check out: • http://www.marketwatch.com/tools/mutualfunds/overview.asp?siteid=mktw&symb=VWELX&sid=5376 Index Funds • An ________________________________________________________________________________________ ________________. Many of these funds are tied to a specific market average such as the Standard and Poor’s Index of 500 large company stocks. • The goal of these funds is to mirror the movements of certain markets, going up as they go up. • These funds are considered moderately risky. For an example of this type of fund check out: http://www.marketwatch.com/tools/mutualfunds/100index.asp?tf=9&view=36&siteid=mktw Money Market Funds • ___________________________________________________________________________________________ _________________________. These short-term maturities provided current income and maximum safety. • ___________________________________________________________________________________________. • For some of the top money market funds check out: http://www.ibcdata.com/index.html Reading a Mutual Fund Quote • Some of the basics: • _______________ – stands for Net Asset Value. It refers to the dollar value of one share of the fund. • _______________ – stand for Year to Date Return. This tells you how much the fund has made or lost that year (listed as a percentage). • ______________. – This tells you the objective of the fund. (Is it a growth, balanced, income etc…) Real Estate Investment • Real estate is considered one of the safest investments out there! Why? • __________________________________________________________________________________. Simply put, over time property values have risen at a greater rate than inflation. • In a ______________________________________________________________________________________ _____________________________________. In an ______________________________________________ investors appoint a trustee to hold legal title to the property on behalf of all the investors in the group. Property Ownership • When buying real estate, most people make a ____________________________ and get a loan secured by a ______________________________________ to pay the balance. • You borrow money to make the purchase and you pay the money back, month by month over time. • Your mortgage stays fixed but the value of the house goes up over time! • For example, if you buy a $200,000 house and make a down payment of $40,000 (__________________ _________________), you have to borrow $160,000 from the bank. • After a five years let’s say the house is now worth $250,000 and you decide to sell it. You could pay off the $160,000 you owed on your mortgage and have $90,000 left. • That extra money is called equity! _________________________________________________________ ____________________________________________________________________________________. Pros and Cons • Real-estate investment _______________________________________________________________________. • Real-estate investment _______________________________________________________________________. • However, real-estate is one of __________________________________________________________________. Depending on the market, it can take months or even years to sell!