A description of each of the 10 mutual funds to include, investment objective, inception date, minimum investment, fund family, fund manager(s), how long the manager(s) has been in place, annual turnover of the fund, fees (front, back, management fee, 12b-1). Explain what each of these terms means in simple terms. (5 points)
Often associated with class 'A' shares of a mutual fund. Also known as Sales Charge, this is a fee paid when shares are purchased. Also known as a "front-end load," this fee typically goes to the brokers that sell the fund's shares. Front-end loads reduce the amount of your investment. For example, let's say you have $1,000 and want to invest it in a mutual fund with a 5% front-end load. The $50 sales load you must pay comes off the top, and the remaining $950 will be invested in the fund. The Maximum sales load under the Investment Company Act of 1940 is 9%. The maximum sales load under NASD Rules is 81⁄2%.
Associated with class "B" mutual fund shares. Also known as Deferred Sales Charge, this is a fee paid when shares are sold. Also known as a "back-end load," this fee typically goes to the Stockbrokers that sell the fund's shares. Back-end loads start with a fee about 5 to 6 percent, which incrementally discounts for each year that the investors own the fund’s shares. The rate at which the fee declines is disclosed in the prospectus. The amount of this type of load will depend on how long the investor holds his or her shares and typically decreases to zero if the investor holds his or her shares long enough.
Descriptive statistics for each of the 10 mutual funds to include, average return over the past 10 years, standard deviation of returns (population)[p129](divided by n), correlation among the 10 funds over the 10 year period, covariance of the 10 funds over the 10 year period. [P270] Explain what each of these terms means in simple terms. (10 points)
The standard deviation is a measure of variability which is used as the standard measure of the total risk of individual assets and portfolios of assets. There are two variants of standard deviation: population and sample. The sample standard deviation is used when working with historical returns, as they are deemed to be samples unless 100% of the data points