Personal Finance 1st Edition by Jack R. Kapoor

Exercise 19

Matching Mutual Funds with Investor Needs. This chapter explored a number of different classifications of mutual funds. (Obj. 2)

a. Based on your age and current financial situation, which type of mutual fund seems appropriate for your investment needs? Explain your answer.

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b. As people get closer to retirement, their investment goals often change. Assume you are now 45 and have accumulated $110,000 in a retirement account. In this situation, what type of mutual fund would you choose? Why?

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c. Assume you are now 60 years of age and have accumulated $400,000 in a retirement account. Also, assume you would like to retire when you are 65. What type of mutual funds would you choose to help you reach your investment goals? Why?

Step 1 of 3

(a) The answer depends upon the investors’ age and future expectation from the investment. Some investor who is young will opt for aggressive growth funds, who will expect higher return from their investment. The risk tolerance level of them will be high because they will have good earning potential so that in case of non-performance of the fund, they can manage with their future earnings.

If investor is young they will prefer to invest in long-term growth fund were they can reap the entire benefit of their investment at the time of retirement. This opinion varies with the age and commitment of the individuals which will be justified by them.