Concept explainers
Spreading Mutual Fund Investments among Asset classes Mutual funds (as well as other kinds of investments) normally are categorized into one of several “asset classes," according to the kinds of stocks or other securities they hold. Small capitalization funds are most aggressive, while cash is most conservative. Many investors, often with the help of an advisor, try to construct their portfolios in accordance with their stage of life. Basically, the idea is that a younger person can afford to be more aggressive (and assume more risk), while an older investor should be more conservative (assuming less risk). The investment diagrams here show typical percentage ranges that might be recommended by an investment advisor. In Exercises 69-72, divide the given investor's money into the five categories so as to position them right at the middle of the recommended ranges.
Asset Classes | |
a. | Aggressive Growth (small cap) |
b. | Growth |
c. | Growth & Income |
d. | Income |
e. | Cash |
Akira Suzuki, in his high-income/saving years, with $400,000 to invest
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Mathematical Ideas (13th Edition) - Standalone book
- You do not need a lot of money to invest in a mutual fund. However, if you decide to put some money into an investment, you are usually advised to leave it in for (at least) several years. Why? Because good years tend to cancel out bad years, giving you a better overall return with less risk. To see what we mean, let's use a 3-year moving average on the Calvert Social Balanced Fund (a socially responsible fund). Year 1 2 3 4 5 6 7 8 9 10 11 % Return 1.78 17.79 7.46 5.95 −4.74 25.85 9.03 18.92 17.49 6.80 −2.38 (a) Use a calculator with mean and standard deviation keys to find the mean and standard deviation of the annual return for all 11 years. (Round your answers to two decimal places.) x = % s = % (b) To compute a 3-year moving average for 1992, we take the data values for year 3 and the prior 2 years and average them. To compute a 3-year moving average for year 4, we take the data values for year 4 and the prior 2 years and average them. Verify that the…arrow_forwardFive years after graduating from college, Lucia Li feels that she is finally ready to invest some of her earnings. She has eliminated her credit card debt and has established an emergency fund. Her parents have been pleased with the performance of their mutual fund investments with Janus Capital Group. She has narrowed her search down to two mutual funds: The Janus Balanced Fund (JANBX): This “core” fund consists of stocks and bonds and its goal is diversification. It has historically produced solid long-term returns through different market cycles. The Janus Overseas Fund (JAOSX): This fund invests in overseas companies based on their individual merits instead of their geography or industry sector. The following table reports a portion of the annual returns (in percent) for these two funds from 2000–2016. Year Balanced. Overseas 2000-2.16-18.57 2001-5.04-23.11 2002-6.56-23.89 2003- 13.74-36.79 2004-8.71-18.58 2005-7.75-32.39 2006-10.56-47.21 2007-10.15-27.76 2008-15.22-52.75…arrow_forward
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