1. What is an Investment
Company
 A financial company that sells shares in
itself to the public and uses these funds
to invest in a portfolio of securities.
 By pooling the funds of thousands of
investors, a widely diversified portfolio
of financial assets can be purchased
and the investment company can offer
its owners a variety of services.

2. Types of Investment
Companies
 Unit Investment Trust
 An unmanaged form of investment
company, typically holding fixed-income
securities, offering investor diversification
and minimum operating costs.

3. Types of Investment
Companies
 Closed-End Investment Company
 An investment company with a fixed
capitalization whose shares trade on
exchange markets.
 Open-End Investment Company (Mutual
Funds)
 An investment company whose
capitalization constantly changes as new
shares are sold and outstanding shares are
redeemed.

4. Net Asset Value of a Mutual
Fund
 Net Asset Value
 The total value of the securities in an
investment company’s portfolio divided by
the number of investment company fund
shares currently outstanding.
 NAV =Total market value of assets under management
Number of mutual fund shares outstanding
 If NAV > Market Price, fund is selling at a discount
 If NAV < Market Price, fund is selling at a premium

5. Net Asset Value
 XYZ mutual fund holds a portfolio consisting of
following shares
 POL (10000 shares @ 440)
 PGF (5000 shares @ 42)
 PSO (5000 shares @ 388)
 NBP (10000 shares @ 258)
 OGDC (10000 shares @ 147)
 The number of shares outstanding are 20000.
 Calculate NAV

6. Major Types of Mutual Funds
 Money Market Funds
 Stock (also called equity) funds and
bond and income fund
 International Funds
 Global Funds
 Single-Country Funds
 Exchange-Traded Funds

7. Mutual Fund Investment
Objectives
 Growth Funds
 Balanced Funds
 Hybrid Funds
 Corporate Bond Funds
 Strategic Income Funds
 High Yield Funds

8. Mutual Funds Subdivision
 Load Funds
 Funds that charge a sales fee for the costs
involved in selling fund to the investors.
 No-Load Funds
 Funds that charge no sales fee. Investors
respond to these funds through
advertisements in the financial press.

9. Measures of Fund
Performance
 Total Return Approach
 TR = Dividend yield + Capital gain yield
 Morningstar Ratings
 Five star rating system
 Five star being the highest rating and one
star the lowest rating.
 Benchmarks

10. Measures of Fund
Performance
 How Important are Expenses?
 Load c harges
 Annual operating expenses
 CONSISTENCY OF PERFORMANCE
 Always being a controversy