Asset Classes Paper Mutual Funds Class A Shares, Class B Shares, Class C Shares

1006 words - 4 pages

PAGE Asset Classes 1
Asset Classes PaperFIN 402The mutual fund chosen is Merrill Lynch Global and the Dow 30 organization chosen is McDonalds. The asset classes for both the mutual fund and Dow 30 organization will be determined. The following will explain how classifications and the current investment environment impact organizational decisions concerning the composition of these portfolios.Merrill Lynch GlobalMerrill Lynch (2006).Merrill Lynch is a company that helps individual clients achieve financial success. With a professional advisor, customers can receive a customized strategy with the customer's goals in mind. It makes available to its clients a wide range of investment products and services. When selecting the fund that best suits the clients need, some key factors to consider include a fund's investment strategy, risk profile, investment performance, and relationship to the overall asset allocation strategy and investment time horizon.Class A Shares. Typically, the most preferred tier of classified stock, offering more voting rights than Class B shares. Class A shares are designed to insulate management from the short-term swings of Wall Street, by allowing those in management to control a small amount of the equity of the company but still maintain voting power. These types of shares are not sold to the public and cannot be traded, which supporters say allows management to focus on long-term goals. Class A shares' annual operating expenses typically include an annual asset-based distribution and service fee of up to .35% (Mutual Funds. 2006). This annual fee is used to compensate the fund's distributor and firms like Merrill Lynch for shareholder servicing and distribution-related services. Class A shares are generally more economical for investors who seek to invest larger amounts and have a longer term time horizon.Class B Shares. Class B shares typically do not charge a front-end sales charge, so all of the assets are immediately invested in a fund. Class B shares usually impose a contingent deferred sales charge (CDSC) which may be charged to shareholders who redeem Class B shares within a certain number of years. This charge declines over time and is eventually limited. Class B shares are more economical for investors who have an intermediate to longer term time horizon and have less than $100,000 to invest in a fund family's equity funds or less than $50,000 to invest in a fund family's fixed income funds (Mutual Funds. 2006).Class C Shares. Class C shares usually do not impose a front end sales charge at the time of purchase. All of the client's assets are immediately invested in the fund. It is common for Class C shares to impose a CDSC up to 1.00% of the redemption amount during the first year or longer (Mutual Funds 2006). Unlike Class B shares which convert to Class A shares after a period of time, C shares generally do not have a conversion feature. Compared to Class A and Class B shares, Class C shares generally become...

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