Bond Mutual Fund Financial Choice

BOND MUTUAL FUND CHOICE

Your Objectives

Choose the best bond mutual fund based on a specified criterion; pick the best fund overall to achieve a given objective.

Decision Preparation

Study the article, "Finding Your Way to a Bond Fund" at the Morningstar Web site.

The Decision Situation

You have decided to invest in a bond mutual fund as a means of accumulating funds for the college education of your three year old daughter. Assume that you are in the 15 percent marginal tax bracket. You are looking at the three bond mutual funds shown in the Bond Mutual Fund Comparison Chart accompanying this financial choice.

Print the chart; then go to the Morningstar Web site, type the symbol of a fund, and hit "Go;" the first two lines of information needed in completing the chart will be displayed.
The main divisions of the Morningstar mutual fund report are listed as clickable icons to the left of the Web page. After clicking on one of these icons, "Total Returns," for example, and scrolling down the resulting page, you will have the information needed for the next two lines of the chart.
To get the "Morningstar Overall Rating, "Standard Deviation," and "Mean Total Return," click on "Ratings and Risk" to the left of the page.
Follow this procedure for the "Portfolio" and "Nuts and Bolts" sections of the chart.
Repeat these steps to get the information on the other two mutual funds.
After you have finished the chart, print a copy of the Bond Mutual Fund Choices Table provided with this financial choice, and make the choices indicated in it.

Related Web Sites for Further Exploration

For bond investing basics, go to the Fidelity Web site, and click on Bond Investing under the "Bond Watch" menu.

For an interpretation of the bond ratings of Moody's Investor Service, Standard and Poor's Corporation, Fitch Investors Service, and Duff & Phelps Credit Rating Company, visit the Bonds Online Web site.

To learn the difference between current yield and yield to maturity, as well as many other facts about bonds, visit the Bond Market Association Web site.

Net Worth Payoff

Your net worth will increase by $50,000 for successfully completing this financial choice. The $50,000 will be earned as follows.

$27,000 ($600 per cell) for accurately completing the Bond Mutual Fund Comparison Table.
$23,000 for correct responses to the questions in the Bond Mutual Fund Choices Table. (The first three questions are worth $5,000 each; choosing the best mutual fund and providing a thorough justification for your choice will earn you $8,000)

Maximization of Net Worth Checklist:

Now that you have completed this financial choice, check to make sure that you have done the following:

Perused the information on bond investing at the Vanguard Web site, paying particular attention to "Selecting the Right Bond Fund."

Printed and completed the Bond Mutual Fund Comparison Chart.

Printed and made the choices in the Bond Mutual Fund Choices Table.

Visited any of the Related Web Sites for Further Exploration you found of interest.