Question

Case Problem 12.1:

The Reverend Mark Thomas is the minister of a church in the San Diego area. He is married, has one young child, and earns a “modest income.” Because religious organizations are not notorious for their generous retirement programs, the reverend has decided he should do some investing on his own. He would like to set up a program that enables him to supplement the church’s retirement program and at the same time provide some funds for his child’s college education (which is still some 12 years away). He is not out to break any investment records but wants some backup to provide for the long-run needs of his family.
Although he has a modest income, Mark Thomas believes that with careful planning, he can probably invest about $250 a quarter (and, with luck, increase this amount over time). He currently has about $15,000 in a savings account that he would be willing to use to begin this program. In view of his investment objectives, he is not interested in taking a lot of risk. Because his knowledge of investments extends to savings accounts, Series EE savings bonds, and a little bit about mutual funds, he approaches you for some investment advice.

a. In light of Mark’s long-term investment goals, do you think mutual funds are an appropriate investment vehicle for him?

b. Do you think he should use his $15,000 savings to start a mutual fund investment program?

c. What type of mutual fund investment program would you set up for the reverend? Include in your answer some discussion of the types of funds you would consider, the investment objectives you would set, and any investment services (e.g., withdrawal plans) you would seek. Would taxes be an important consideration in your investment advice? Explain.

PLEASE ANSWER THE QUESTION WITH A TEXT RESPONSE NOT WITH A PHOTO UPLOAD!

Answer 1

a) mutual fund is a diversify product that will lead to risk at minimum and mark is also not interested in taking a lot of risk so mutual fund is appropriate for him. For long term mutual fund is best reason being there you will earn a regular earning i.e. there is no up down which will happening in shares

b) he should start with $15000 as lump sum so he can earn more what he is earning currently on this $15000 .after that he can start a new SIP $250 quarterly basic.

C) we will check so may things before investing in anything so before investing in mutual fund I will check lock in period . I will check where the mutual fund guy is parking money and risk associated . I will check past peroperform. Taxes is aloo important factor in deciding to investing in mutual fund . Now we can invest mutual fund so easliy i.e. we don't require to open a demat account. So I will check the process for investing and I will direct invest and ignore agnet which will save my money