AN INVESTOR’S TOUR OF MUTUAL FUNDS · the basics of mutual funds. Let’s take a moment to review...

MKD-3361I-A-PW EXP 31 AUG 2020 © 2019 EDWARD D. JONES & CO., L.P. ALL RIGHTS RESERVED.

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AN INVESTOR’S TOUR OF

MUTUAL FUNDS

Page 2MKD-3361I-A-PW EXP 31 AUG 2020 © 2019 EDWARD D. JONES & CO., L.P. ALL RIGHTS RESERVED.

An Investor’s Tour of Mutual FundsMutual funds may play a major role as investors try to reach their long-term financial goals. An Investor’s Tour of Mutual Funds provides a detailed look at the features, benefits and risks associated with this type of investment as well as a map to mutual fund selection.

At Edward Jones, we demonstrate our commitment to you, the individual investor, by being accessible and transparent (in the way we do business) – and, most importantly, we always put your best interests above everything else.

Seminar ContentsAn Investor’s Tour of Mutual Funds......................................................................................................2

Key Steps to Financial Success.............................................................................................................3

What Is a Mutual Fund?...........................................................................................................................4

Mutual Fund Features...............................................................................................................................5

A Map to Mutual Fund Selection..........................................................................................................6

Prospectus Review.....................................................................................................................................7

Mutual Fund Benefits and Trade-offs..................................................................................................8

Systematic Investing..................................................................................................................................9

Key Points....................................................................................................................................................10

My Action Plan............................................................................................................................................11

Important Considerations.......................................................................................................................12

Glossary.........................................................................................................................................................13

Welcome


1WHERE

AM I TODAY?

2WHERE

WOULD I LIKE TO BE?

3CANI GET

THERE?

4HOW DO

I GET THERE?

5HOW CAN I STAY ON TRACK?

MY FINANCIAL

NEEDS

®

Key Steps to Financial Success

Seminar OverviewAn Investor’s Tour of Mutual Funds is a 30-minute investment primer designed to remove the financial shroud of mystery surrounding the investment process and empower you – the investor – with the information you need to make informed decisions.

The more you know about the tools and strategies used by your financial advisor, the more comfortable you’ll be with how your money is being invested.

This seminar will:

1. Help you become a more educated investor.

2. Assist you in your path toward reaching your individual goals and making invest-ment decisions.

The answers to these five questions will help provide you with a clearer out-look for your future.


What Is a Mutual Fund?

1. A mutual fund is a professionally managed investment that pools money from many

investors into ____________________________, ____________________________,

_______________________________________________ and/or other securities.

2. When you invest in a mutual fund, you buy _________________ of the fund. Your

money is ______________ with that of other fund investors. A professional money

manager or money management team then invests that pool of money into a variety

of securities such as stocks and bonds.

Answer 1: Stocks, bonds, short-term money market instruments; Answer 2: Shares, pooled


Mutual Fund Features

1. Dividends and ______________________

2. _______________________ in share price

3. _________________________ distributions

Answer 1: Dividends and interest; Answer 2: Increase in share price; Answer 3: Capital gains distributions

MKD-3361I-A-PW EXP 31 AUG 2020 © 2019 EDWARD D. JONES & CO., L.P. ALL RIGHTS RESERVED. Page 6

NOTES

• Your Portfolio

• Prospectus

• Fund Objective

• Management Team

• Volatility

• Fees and Expenses

A Map to Mutual Fund Selection


NOTES

Once you’re aware of your personal risk tolerance, you’ll want to begin looking for mutual funds that best work with your personal investment goals and risk tolerance. A great way to find detailed information about a fund is through its prospectus.

Carefully read the prospectus for information on fund objectives and goals, strategies, risks, fees and expenses with your investment goals in mind.

Updated at least once a year, a prospectus contains valuable information about investment objectives and goals, managers and advisors, fees, expenses and how to purchase or redeem fund shares.

Other important sections include:

• Fund management team – Read this section to find out about their experience and track records.

• Volatility – This section shows large increases or decreases in returns over the years. Generally, the more volatile the fund is, the more risk tolerance you will need.

• Fees and expenses – This section will help you weigh your decision as to which mutual funds may be right for your particular strategy.

Prospectus Review


Mutual Fund Benefits and Trade-offs

Diversification

Professional management

Liquidity

Discipline

Choice

Benefits

Call and prepayment risk

Share performance risk

Fluctuation risk

Trade-offs


Mutual Fund Benefits and Trade-offs

Systematic investing is when you invest the same amount of money on a regular basis – for example, $1000 each month.

This way, you buy fewer shares when prices are higher and more shares when prices are lower.

Systematic investing does not ensure a profit or protect against loss. It’s a strategy that involves continual investment in securities regardless of fluctuating price levels of such securities. That’s why you should carefully consider your financial ability to continue the purchases through periods of low price levels.

Source: Bloomberg

Past performance does not guarantee future results. The S&P 500 is unmanaged and is not available for direct investment. Systematic investing does not guarantee a profit or protect against loss. Such a strategy involves continual investment in securities regardless of fluctuating price levels of such securities. The investor should consider the financial ability to continue the purchases through periods of low price levels. This example does not include fees, commissions and taxes, which would reduce the results. Dividends can be increased, decreased or eliminated at any point without notice.

S&P

500

INDE

X

1,600

1,400

1,200

1,000

800

600

1,600

1,400

1,200

1,000

800

600

Total Amount Invested $48,000

Value at End of Period $52,074

Dividends $3,126

Total Value $55,200

141812/29/2006

6763/9/2009

125812/31/2010

YEAR

11% Decline

52% Decline

Dec-2006 Dec-2007 Dec-2008 Dec-2009 Dec-2010


Long-term/Systematic Investing

Mutual funds offer a large range of options for all types of investors. It’s important to know what your risk tolerance is and how to tell mutual fund investments apart before investing in one. You’ve made the first step today by educating yourself on the basics of mutual funds.

Let’s take a moment to review what you’ve learned.

1 Mutual funds offer diversification, the ability to invest at a low cost, professional management and the ability to easily choose investments that fit your goals.

2 Mutual funds do not guarantee that you will earn a profit or be protected against loss. That’s why it’s important to understand both the benefits and the risks.

3 A mutual fund should be a long-term investment. Although people hold their mutual funds on average only two to three years, we encourage you to not follow the crowd.

4 Know your financial objectives and what level of risk you are comfortable taking to reach those objectives.

5 Review your mutual fund investments at least annually with your financial advisor.


My Action Plan

Now that you know more about mutual funds, it’s time to put your knowledge

to work.

Instructions: Fill in the blanks below with a goal you’d like to reach. Under that, write

down what you can do within that time frame to help you reach your goal. Examples

have been listed below for your reference.

GoalWhat can I do in the next:

48 hours

2 weeks

Month

3 months

Year

Action Plan Examples48 hours Schedule a date with your spouse or significant other to discuss

financial goals.

2 weeks Gather all your financial accounts and statements.

Month Schedule an appointment with a financial advisor to develop an investment

strategy tailored to your risk tolerance and financial goals.

3 months Put your strategy into action!

Year Review your strategy to see if you are on target to reach your goals

or if adjustments need to be made.


NOTES

Important Considerations

Mutual fund investing involves risk. Your principal and investment return in a mutual fund will fluctuate in value. Your investment, when redeemed, may be worth more or less than the original cost.

Mutual fund prospectuses contain more complete information, including the fund’s invest-ment objectives, risks, and charges and expenses as well as other important information that should be carefully considered. Your financial advisor can provide a prospectus, which you should read carefully before investing or sending money.


Glossary

12b-1 Fee – An annual marketing or dis-tribution fee on a mutual fund. The 12b-1 fee is considered an operational expense and, as such, is included in a fund’s expense ratio. It is generally between 0.25% and 1% (the maximum allowed) of a fund’s net assets. The fee gets its name from a section in the Investment Company Act of 1940.

A Share – In a family of multi-class mutual funds, this is the class that is usually characterized by a loaded fee structure. Class A mutual fund units will have only front-end load charges.

B Share – A class in a family of multi-class mutual funds. This class is charac-terized by a back-end load structure that is paid only when the fund is sold.

Back-end Load – A fee (sales charge or load) that investors pay when selling mutual fund shares within a specified period of time, which usually ranges from five to 10 years. The fee amounts to a percentage of the value of the share being sold. The fee percentage is high-est in the first year and decreases yearly until the specified holding period ends, at which time it drops to zero. Also known as a contingent deferred sales charge (CDSC) or load.

Breakpoint – The dollar amount for the purchase of the fund’s shares that qualifies the investor for a reduced sales charge (load).

C Share – In a family of multi-class mutual funds, the class that has a constant load structure throughout the life of the fund.

Capital Gains Distribution – Profits derived from the sale of stocks and/or bonds that are distributed from the fund.

Contingent Deferred Sales Charge (CDSC) – See Back-end load.

Diversification – A method to reduce investment risk by putting funds in sev-eral investment categories (e.g., growth, growth and income, and income). Diversi-fication among stocks can be by industry or geographic location.

Dividend – Payment from a company to its shareholders, historically based on its earnings. Dividends are usually paid quar-terly in the form of cash and sometimes stock. Payments are in proportion to the number of shares an investor owns.

Equity – Ownership interest in a corporation, held by investors through common and preferred stock. Corpo-rations issue equity to raise funds for investment in the company.

Front-end Load – A commission or sales charge applied at the time of the initial purchase of mutual funds.


Glossary

Interest – Payments made by a borrower to a lender for the use of its funds. A corporation pays interest on its bonds to the bondholders.

Liquidity – How easily one’s assets can be converted into cash. For example, a security that can’t be redeemed for 10 years is not considered liquid; however, money that can be withdrawn from an account at any time has a high degree of liquidity.

Management Fee – The expense paid by an investment company to the investment adviser for managing the portfolio, typically a management company’s largest expense.

Mutual Fund – A type of investment company that pools investors’ money and then invests in a diversified portfolio of securities.

Net Asset Value (NAV) – The market value of an investment company’s port-folio less any prorated liabilities. The net asset value typically is calculated on a daily basis, or more frequently if stipu-lated in the company’s prospectus. The net asset value per share of a mutual fund is also the bid or redemption price.

No-load – A mutual fund in which shares are sold without a commission or sales charge. The reason is that the shares are distributed directly by the investment company instead of going through a secondary party.

Principal – The amount you invest, on which you have a gain or loss. Principal also refers to the balance of a debt, separate from interest.

Prospectus – A formal legal document required by and filed with the Securities and Exchange Commission that provides details about an investment offering for sale to the public. A prospectus should contain the facts an investor needs to make an informed investment decision. It is also known as an offer document.

Risk Tolerance – The degree of uncer-tainty you can handle in regard to the change in your portfolio due to market fluctuations.

Systematic Investing – A method of investing a fixed dollar amount on a regular basis.

Tax Deferred – Income whose taxes can be postponed until a later date.

Volatility – Price fluctuation.

(cont.)


Notes

&AnswersQuestions

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