MiniCase 3

Topics: Investment, Mutual fund, Index fund Pages: 1 (508 words) Published: October 24, 2014

Mini-Case 3
There are various advantages and disadvantages mutual funds offer compared to company stock for you retirement investing. Advantages: First, there is a lower cost; mutual funds are usually lower in expenses than company stock. Second, diversification, where diversification is used to reduce the portfolio risk. When you invest in multiple stocks from different companies there are more benefits from lower risk. Third they are convenient. Mutual funds are relatively easy to buy. Minimum investment is low and they are only traded once a day. There is also a fund manager who is knowledgeable and makes the investment decision so you do not have to. Disadvantages: Mutual funds are more expensive than company stock because there are no discounts like on common stock. There are fees involved with mutual funds because you are paying for that investment decisions. Mutual funds are a lot loss riskier than company stock. You are much more likely to lose more if company stock fails vs with a mutual fund. For every dollar invested, S & S Air also invested a dollar. This is a 100% return on investments. There is a dollar to dollar match up to 5%. For every dollar that is put into your 401 (k) plan, your company will also put in a dollar. Once you reach a total of 5% of your gross pay contributed for the year, your employer won’t add any more dollars to your account until the next calendar year. My answer thus suggests that matching programs are great for long term financial planning and retirement planning. Assuming I decide to invest at least part of my money in large capitalization stocks of companies based in the United States, I must think of the advantages and disadvantages. The advantage of choosing Arias Large-Company Fund compared to Arias S & P 500 Index Fund is it is a large company fund that is actively managed by the fund manager. This fund has outperformed the market in 6 of the last 8 years. The disadvantage of choosing Arias...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Essay about ECT122 W1 ILab 3
  • 3 Idiots Essay
  • Essay about 3 Idiots
  • Helium 3 Essay
  • Marketing : Week 3 Assignment Essay
  • 3 Idiots Essay
  • 3 Idiots Essay
  • 3 Idiots Essay

Become a StudyMode Member

Sign Up - It's Free