section 1 - The American College Online Learning Center

(1) Benchmarking mutual funds(2) Appropriate(3) On target(4) Costb. 1-, 3-, 5- and 10-year comparisons(1) Index (find the correct index)(2) Peer group(3) Compare to industry; not market22. Systematic approacha. Consider a blended portfolio(1) Equity and bond mutual fund holdings (80%)(a) Domestic and international(b) Diversification and low correlations are key(2) Alternative funds to combat inflation (20%)(3) Low annual costs(4) Avoid back-end or redemption chargesb. Monthly withdrawals(1) Set a date (1 st of month) to eliminate timing risk(2) Fund proceeds settle to cash account23. Bucket approacha. Consider distinct funds for each bucket(1) Equity based fund for long-term holdings(a) (15+ year needs)(b) Value and growth(c) Tax efficient(2) Bond based funds for mid-term holdings(a) (10–15 year needs)(b) Varying durations(c) Safer (80%) with some higher yield components (20%)(3) Cash based instruments for short-term holdings(a) (1–5 year needs)(b) Tax friendly(c) Lower yield than other buckets(d) Stress liquidity24. Flooring approacha. Mutual funds are not intended to “guarantee.”(1) Avoid mutual funds if guaranteed income is absolutely needed.(2) Blend mutual funds with other higher cost guarantee-based products.7.13