Mutual Fund Assignment



Module 7 Mutual Fund Assignment: The questions below relate to the readings. Please type all short answer responses. Responses to questions requiring calculations should be typed or neatly hand-written.What does it mean when a fund charges a “load”? Who gets the monies collected for the load? (Hint: it’s usually not the company managing the fund.) Some loads can be as high as 4-5%. Why would an investor be willing to pay a load for a fund when there are funds that don’t charge a load? What are three key differences between index mutual funds and actively managed mutual funds? What are the advantages and dis-advantages between and ETF and a mutual fund that invests in a market index?Use Vanguard’s website to compare and contrast two investments – Vanguard Total Stock Market ETF (ticker VTI) and Fidelity’s Magellan Fund (ticker FMAGX). Starting from the Home page enter the ticker of one of the two investments in the box that says “Find a Fund” and click Go. When the new page comes up, click on the fund’s name which will bring up information regarding the fund or ETF. At the right of the screen, you should see a button or menu option that says “Compare Funds” or simply “Compare” This will allow you to compare side by side information regarding VTI and FMAGX. If you are having problems, feel free to call the Vanguard toll free number and speak with a customer service representative to help you navigate the website. Once you have the side by side comparison fill in the following table:All data must be from the most recent quarter end which is December 31. Any submission that uses prior data will be returned to sender. These are 2 of the largest mutual funds/ETFs in the world. There is plenty of information out there to get a 100 on this assignment.Vanguard Total Stock Market (VTI)Fidelity Magellan (FMAGX)CategoryExpense RatioDate for performance information below:Year to date1-year3-year5-year10-yearTop 10 holdingsNumber of StocksMedian market capPrice / EarningsPrice / BookEarnings Growth RateTurnover rateBeta vs. S&P 5003 Largest Sector DifferencesUse the table above to answer the following:Comment on the difference in turnover and the impact this would have on pre-tax and after-tax returns. Which investment is likely to have the greater tax penalty? Why?Compare the short- and long-term performance history of the two funds. Mutual fund performance is reported NET of the expense ratio (e.g. after fees). Do fees explain the performance difference over the short and long-term?Note the comment from Vanguard that states “The investments or benchmarks you chose fall into different investment categories. This comparison may not provide complete or accurate results”. What do you think Vanguard means buy this? Hint: consider differences in the Price / Earnings; Price / Book; Earnings Growth Rate; which are metrics used to help categorize a stock portfolio as being core, growth or value. Growth portfolios typically have higher Price / Earnings and Price / Book ratios than core portfolios, which in turn have higher ratios than value portfolios. Also consider the sector differences especially in the more growth oriented sectors such as technology & healthcare; and the value-oriented sectors such as financials, industrials, energy and utilities. As part your answer, note the stated benchmark for the Magellan Fund and compare its performance to that of VTI over time. ................
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