Homework: Financial Markets
Learning Outcomes:
A. Demonstrate a deep understanding of the role of financial markets and financial institutions
B. Understand the primary classes of mutual funds available to investors and the benefits of different investment funds
C. Understanding NAV calculations
D. Understanding the relation between risk and return
Task:
A. Assume you are an investment advisor. Your client is unsure what are the main benefits and reasons for investing in a Mutual Fund or in an index fund with an ETFs.
• Explain the main differences and similarities between eachother
• Explain what are the main advantage and disadvantage of investing in mutual funds orETFs versus investing in Equity Stocks.
• Explain the difference between investing in fixed income and an ETF that follows the S&P 500.
• Explain the main difference between active and passivemanagement
• Explain what is the difference between investing in value companies or in growth companies.
B. Go to Morningstar website.
• What information does provide the Morningstar StyleBox?
• Morningstar assigns a Rating to each Mutual Fund. What are the criteria they use to assign thisrating?
• Use the information provided above (style box and ratings) to choose 2 different mutual funds/ETFs (4 funds/ETFs per each portfolio) to prepare 2 portfolios for 2 different types ofinvestors:
o Aggressive
o Conservative
o The total amount to invest in each portfolio is 1.000.000€.
• In half a page for each portfolio,explain:
o The rationale behind choosing the given funds/ETFs per eachportfolio
o The criteria chosen to build eachportfolio
• Followupthepricesforall2portfoliosforaweek.Calculatethereturnforeachportfolioattheendoftheweek.Explainyourresults and show them graphically. Compare in the same graph the development of the two portfolios you have chosen and the development in the same period of the S&P500 index. Explain you conclusions.
Format your homework according to the give formatting requirements:
• The answer must be using Times New Roman font (size 12), double spaced, typed, with one-inch margins on all sides.
• The response also includes a cover page containing the student's name, the title of the homework, the course title, and the date. The cover page is not included in the required page length.
• Also include a reference page. The references and Citations should follow APA format. The reference page is not included in the required page length.