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Set Up a Mutual Fund Portfolio
You have graduated from college (with no credit card debt thanks to your Academy classes in high school!) and have been employed for two years. You have already set aside three months salary as an emergency fund and you’re now ready to begin investing to build wealth for the future. You have $25,000 (over and above your emergency fund) and you’ve chosen to invest it in mutual funds. Let’s get started.
1. Determine your risk tolerance. To begin, take these two online quizzes:
A. http://www.nmfn.com/tn/global--forms--risk_calc_pg. Write your score here_______.
B. http://www.investored.ca/Quizzes/InvestorPersonality/quiz_investor_personality.htm Write a description of your risk tolerance:________________________ ________________________________.
2. To answer the next set of questions, go to www.schwab.com, click on the Investment Products tab, then Mutual Funds tab, then Portfolio Solutions (on the left), then Schwab Portfolios. Scroll down and use your mouse to show and review the five different portfolio models. Based on your level of risk tolerance, circle the type of portfolio you plan to build:
Conservative Moderately Conservative Moderate
Moderately Aggressive Aggressive
3. Complete the portfolio allocation for this type of portfolio?
_________ % _____________________________________________ _________ % _____________________________________________ _________ % _____________________________________________ _________ % _____________________________________________ _________ % _____________________________________________
For the type of portfolio you have chosen, answer the following: Average Annual Return (1970-2006) ___________________% Best Single Year Return _____________________% Worst Single Year Return _____________________%
4. Now you’re ready to choose your mutual funds. Follow these rules: a. For your Large Company Equity holdings, split your money evenly between Growth and Value Funds. b. For your Small Company Equity holdings, split your money evenly between Growth and Value Funds. You may choose either small or mid-cap funds here. c. Do not buy industry or sector specific funds. d. For International Equity holdings, make sure to invest in at least one fund that has exposure all over the world, or use two or three regional funds (Asia, e. For Fixed Income holdings, look for Intermediate-Term, high quality bond funds that hold both corporate and government bonds.
To continue, go to www.morningstar.com, click on the Funds tab, then scroll down the page and look for the Fund Screener on either the right or left side. Use the fund screener to narrow down your search. Look for
a. Funds in the appropriate Group and Category b. Funds that have a manager with a long term track record (5 years is okay, 10 years is better). c. Funds that have good long-term track records (5 and even 10 years) 1. Good category rank 2. Beats benchmark consistently d. All things being equal, funds with lower expense ratios are better e. All things being equal, no-load funds are better f. Funds with an initial dollar investment that meets your criteria
5. Pick your funds. Depending on your portfolio allocation and the funds you choose, you may have as few as 4 or 5 funds, and as many as 7 or 8. List the funds chosen, dollar amount to invest, and percentage invested here:
Type: LG,
6. For the final step, provide details on four of your funds on the following page. Include at least two equity (stock) mutual funds and one fixed income (bond) fund.
Fund 1
Fund Name________________________________________________________ Ticker Symbol_______________ Category ______________________________ Manager Name ______________________________ Tenure (in years) ___________ Benchmark Index _________________________ Morningstar Rating ________ Stars Total Return: 1yr__________ 3yr___________ 5yr___________ 10yr___________ +/- Benchmark: 1yr_________3yr___________ 5yr___________ 10yr___________ Rank in Category: 1yr________ 3yr__________ 5yr___________ 10yr___________ Number of holdings (stocks or bonds):________________ Average Market Cap of stock holdings or maturity of bonds: _______________ Top three holdings: 1._________________________________ 2._____________________________ 3.___________________________________ Describe any loads or is it a no-load fund? __________________________________ For Bond Funds only – Average Credit Quality ________________________ Net Expense Ratio_________________% Total Assets$_______________________ Minimum Initial Investment $____________Additional Investments $____________ Name three brokerages (fund supermarkets) where you can buy this fund: ______________________ ______________________ ______________________
Fund 2
Fund Name________________________________________________________ Ticker Symbol_______________ Category ______________________________ Manager Name ______________________________ Tenure (in years) ___________ Benchmark Index _________________________ Morningstar Rating ________ Stars Total Return: 1yr__________ 3yr___________ 5yr___________ 10yr___________ +/- Benchmark: 1yr_________3yr___________ 5yr___________ 10yr___________ Rank in Category: 1yr________ 3yr__________ 5yr___________ 10yr___________ Number of holdings (stocks or bonds):________________ Average Market Cap of stock holdings or maturity of bonds: _______________ Top three holdings: 1._________________________________ 2._____________________________ 3.___________________________________ Describe any loads or is it a no-load fund? __________________________________ For Bond Funds only – Average Credit Quality ________________________ Net Expense Ratio_________________% Total Assets$_______________________ Minimum Initial Investment $____________Additional Investments $____________ Name three brokerages (fund supermarkets) where you can buy this fund: ______________________ ______________________ ______________________
Fund 3
Fund Name________________________________________________________ Ticker Symbol_______________ Category ______________________________ Manager Name ______________________________ Tenure (in years) ___________ Benchmark Index _________________________ Morningstar Rating ________ Stars Total Return: 1yr__________ 3yr___________ 5yr___________ 10yr___________ +/- Benchmark: 1yr_________3yr___________ 5yr___________ 10yr___________ Rank in Category: 1yr________ 3yr__________ 5yr___________ 10yr___________ Number of holdings (stocks or bonds):________________ Average Market Cap of stock holdings or maturity of bonds: _______________ Top three holdings: 1._________________________________ 2._____________________________ 3.___________________________________ Describe any loads or is it a no-load fund? __________________________________ For Bond Funds only – Average Credit Quality ________________________ Net Expense Ratio_________________% Total Assets$_______________________ Minimum Initial Investment $____________Additional Investments $____________ Name three brokerages (fund supermarkets) where you can buy this fund: ______________________ ______________________ ______________________
Fund 4
Fund Name________________________________________________________ Ticker Symbol_______________ Category ______________________________ Manager Name ______________________________ Tenure (in years) ___________ Benchmark Index _________________________ Morningstar Rating ________ Stars Total Return: 1yr__________ 3yr___________ 5yr___________ 10yr___________ +/- Benchmark: 1yr_________3yr___________ 5yr___________ 10yr___________ Rank in Category: 1yr________ 3yr__________ 5yr___________ 10yr___________ Number of holdings (stocks or bonds):________________ Average Market Cap of stock holdings or maturity of bonds: _______________ Top three holdings: 1._________________________________ 2._____________________________ 3.___________________________________ Describe any loads or is it a no-load fund? __________________________________ For Bond Funds only – Average Credit Quality ________________________ Net Expense Ratio_________________% Total Assets$_______________________ Minimum Initial Investment $____________Additional Investments $____________ Name three brokerages (fund supermarkets) where you can buy this fund: ______________________ ______________________ ______________________ Type: LG, | ||||||||||||||||||||||||||||||||||||
