Question

Research a family of funds - such as American Funds or Fidelity or Vanguard.

Find two specific mutual funds within a family of funds that you would invest in if you suddenly inherited $120,000.

Explain which ones, why and how much you would invest in each. (one page)

Answer 1

Answer: Mutual fund- It is the fund that pools our money and invests it into different asset class so that risk can be diversified.

Advantage of mutual funds- Are as following:

1. Mutual funds are professionally managed. Fund managers invest our money into the funds that are based on our needs and risk profile.
2. Mutual funds diversify the risk by investing units into different sectors and companies.
3. Mutual funds provide tax benefits also, there are some tax saver funds that save our tax.

Vanguard fund- The Vanguard Group is a registered investment advisor in America with over 5.3 trillion in Asset under management. It provides mutual funds, ETFs, annuities, financial planning, asset management and trust services.

I will choose two funds of Vanguard

(1): Vanguard total stock market ETF- Few important points:

• It tracks the performance of CRSP US Total market Index.
• It invests into Large cap, mid cap and small cap.
• The fund remains fully invested.
• Expense ratio is lower that is .03%.
• It current Net asset value (NAV) is $132.20 (As on April 6).
• This fund has a risk that is 4 out of 5.
• Its 10 year return is 10.17%

I have chosen this fund because US equity market is down currently, the NAV of this fund is also down, after we will over come the COVID 19, stock market will do well and go up so this is the right time to invest into this fund.

(2): Vanguard Large Cap Index Fund Admiral Shares-

• This fund invests into Large cap stocks.
• This fund is good for long term.
• Expense ratio is lower that is .05%.
• Current NAV is $61.62
• It has 5 star ratings by Morning star.
• It 10 year return is 10.48%.

This fund is also good to invest currently because Large cap stocks have come down, NAV is also lower.