10.6 Comparing Mutual Funds
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--Investment policy, track record, portfolio, and sales load should all be researched when assessing a fund. --The identity of the custodian bank for the fund, or number of shares outstanding, does not bear on its performance or suitability.
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--Mutual fund performance statistics must show results for 1, 5, and 10 years, or the life of the fund, whichever is shorter.
10.6.2.2
--The management fees paid by an investment company are part of the operating expenses of the fund. -- Custodial fees are also part of the operating expenses. --A sales load is a selling cost contained within the underwriting agreement.
10.6
A mutual fund's expense ratio is found by dividing its expenses by its: --average annual net assets. --A mutual fund's expense ratio is calculated by dividing its expenses by its average annual net assets. -- expense/avg NA
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If a registered representative is comparing two mutual funds for a customer, which of the following comparisons would NOT be permissible? ***********Comparing an equity growth fund to a money market fund with the intention of convincing an investor to purchase the growth fund. ********* B) Comparing diversified growth funds from two different fund families. C) Comparing two equity funds with slightly different investment objectives, even if the differences and their consequences are carefully explained. D) Comparing a long-term bond fund to a shorter-term bond fund to demonstrate the trade-offs that exist between risk and return. ---A characteristic of money market funds is that they deliberately avoid growth. ---Thus, for the growth investor, a comparison of a money market fund to a growth fund is an unfair comparison.
