User Rating:  / 0

Related Content: MGT604 - VU Lectures, Handouts, PPT Slides, Assignments, Quizzes, Papers & Books of Management of Financial Institutions

Mutual Funds

Navigating the Investing Frontier: Where the Frauds Are

Many fraudsters rely on the telephone to carry out their investment scams. Using a technique known as cold calling (so-called because a caller telephones a person with whom they have not had previous contact), these fraudsters will hound you to buy stocks in small, unknown companies that are highly risky or, sometimes, part of a scam. In recent years, the Internet has also become increasingly attractive to fraudsters because it allows an individual or company to communicate with a large audience without spending a lot of time, effort, or money.

You should be skeptical of any offers you learn about from a cold caller or through the Internet. Here's what you need to know about cold calling and Internet fraud.

Cold calling

For many businesses, including securities firms, cold calling serve as a legitimate way to reach potential customers. Honest brokers use cold calling to find clients for the long term. They ask questions to understand your financial situation and investment goals before recommending that you buy anything.

Dishonest brokers use cold calling to find "quick hits." Some set up "boiler rooms" where high-pressure salespeople use banks of telephones to call as many potential investors as possible. Aggressive cold callers speak from persuasive scripts that include retorts for your every objection. As long as you stay on the phone, they'll keep trying to sell. And they won't
let you get a word in edgewise. Our advice is to avoid making any direct investments over the phone.

Read more: MGT604 - Management of Financial Institutions - Lecture Handout 26

User Rating:  / 0

Related Content: MGT604 - VU Lectures, Handouts, PPT Slides, Assignments, Quizzes, Papers & Books of Management of Financial Institutions

Mutual Funds

Cost of Ownership

1. Management Fee

All mutual funds, including no-load funds, have certain fixed expenses that are built into their per share net asset value. These expenses are the actual costs of doing business.

They are deducted from the assets of the fund. It is advisable to check the prospectus to determine the percentage of the fund's total net assets that is paid out for expenses.

Additionally, shareholder services provided by the fund, investment adviser's fees, bank custodian fees, and fund underwriter costs also come out of the fund's assets. These charges vary from fund to fund; however, they are clearly spelled out in the prospectus.

On a per-share basis, however, management expenses are usually quite small, because they are spread over the tens of thousands, or the millions, of shareholders in the fund.

The formula for determining the cost of a fund's management expenses is simple: From the current value of the fund's total assets subtract liabilities and expenses, and divide the result by the number of outstanding shares. The fund's prospectus and /or annual reports often provide this data. Management fees and expenses are usually expressed as a ratio of expenses paid out to total assets. Generally, the prospectus will show these expense ratios.

Read more: MGT604 - Management of Financial Institutions - Lecture Handout 25