IndexesMutual Funds

Stock Market Index A method of measuring the value of a

section of the stock market Computed from the prices of selected

stocks Describes the market and compares the

return on specific investments

S & P 500 Index Standard & Poor’s 500 Standard and Poor are the last names of

the two men that founded the index Companies included in the index are

selected by the S & P Index Committee Companies included in the index trade

common stock on the NYSE

S & P 500 Index Top 500 companies Chosen for their market size, liquidity

and industry grouping Liquidity-The degree to which a stock

can be sold without affecting the price Characterized by high level of trading

activity Assets that can be easily bought or sold

are considered liquid assets

S & P 500 Index, In a Nutshell Essentially, the S & P 500 is a report From this report, you can see how the top

500 companies are doing on the stock market and what their market value is

This helps you decide if the stock you are considering purchasing is a good investment

Just because the company is not on the list does not mean their stock is not a good investment

Examples Some companies currently listed on the

S & P 500: Abercrombie & Fitch (ANF)

Pepsi Co. (PEP) Mastercard, Inc. (MA)

Wells Fargo (WFC) Google (GOOG)

Dow Jones Industrial Average an index that shows how 30 large

publicly owned companies based in the United States have traded during a standard trading session in the stock market

Founded by Charles Dow and Edward Jones

Lists stocks traded on both the NYSE and NASDAQ

Dow Jones Industrial Average Often referred to as “The Dow” Basically a market report, just like the S & P 500

Portfolio A grouping of financial assets such as

stocks, bonds & mutual funds If you have investments, they are

grouped in your portfolio

Bonds A debt investment in which an investor

loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate.

Bonds are used by companies, municipalities, states and U.S. and foreign governments to finance a variety of projects and activities.

Mutual Funds A type of investment made up money

from many investors for the purpose of investing in a variety of different types of securities at once

There are more than 17,000 mutual funds to choose from

Open-Ended Funds Sell as many shares as investors want to

buy They will only stop selling shares if the

fund grows too large If you want to sell your shares, you sell

them back to the fund

Closed-End funds Only a fixed number of shares are sold

on the stock exchange Once all the shares are sold, no others

can be bought

Exchange-Traded funds This type of fund invests in stocks that

closely follow an index

Making Money on Mutual Funds Just like stocks, Mutual Funds grow in

value and are paid dividends The managers of the fund sell the

securities at a profit and distribute the money to fund holders

Variety You can invest in many types of mutual

funds Some funds have a purpose A number of funds have been created to

support ideas or causes

Special Mutual Funds Some funds support particular causes

such as: Women’s Issues Companies with socially responsible

business practices Family friendly companies

Mutual Fund Families A group of funds offered by the same

investment company A fund family can use different

distributors for different funds The family of funds will often include

many different types of securities

Diversification

A risk management technique that mixes a wide variety of investments within a portfolio

Mutual funds are a great investment because they offer diversification

The goal of diversification is to try to balance underperforming stocks with stocks that are doing well

Ticker Symbols Five letters long End in an “X”

Morningstar An investment research firm that

compiles mutual, stock and general market data

Respected and reliable source of investment analysis

Risk Rating Morningstar rates mutual funds

according to their level of risk Rankings are from 1-5 1 is the poorest and 5 is the best Ratings are designed to quickly identify

funds to consider purchasing

YTD Return Year to date (YTD) The period beginning January 1of the

current year up until today’s date The percentage of profit an ivestment is

making so far this year

NAV Net Asset Value The price at which investors buy and

sell from a fund company