Slide MGT305 Slide04

(1)

Mutual Funds and Hedge

(2)

•One of the attractions for small investors is the diversification opportunities.

•_{There are various kinds of mutual funds}

such as bonds funds, equity funds, hybrid funds, and money market funds.

(3)

• The most common type of mutual funds is open-ended as investors buy more shares and vice versa.

• Shares can be sold and purchased anytime.

• _{Net asset value of the fund is calculated by}

(4)

(5)

•Some funds are designed to track a particular index such as S&P 500.

•_{It can be done through buying all the}

shares in the index in amounts that reflect their weight.

•Or investor could choose to a have a

(6)

•There are costs to owning mutual funds such as management expenses, sales commissions, accounting costs, transaction costs, etc.

•A front-end load is a fee charged to investors at the first-time buy.

•_Back-end _load_{is a fee charged to investors}

(7)

•The fee structure gives hedge fund managers to make profits and take risks.

•Fund managers have a call option on the assets of the fund which increases in value as volatility rises.