HDFS 238 Personal Finance

HDFS 238 Personal Finance

Assignment #3

Assignment Due:March 11, 2019 at 11:59 pm EST; Total Points: 20 Points

In the previous two assignments, you have planned for your post-graduation life. For this assignment, pretend you are going to open an account and buy stocks.

Question 1:

Suppose that you have done your research onbrokers and have decided to invest with Broker A. Here are the benefits that Broker A provides:

You decide to invest $5000 in stocks. Use at least one (or all) of the stocks that you chose for Assignment #2 and complete the chart below.

Reminder:Commission fee is a service charge assessed by a broker or advisor in return for providing advice and/or handling the purchase or sale of a security. Some brokers charge commission fees for each transaction, others may charge a commission fee on each share of stock purchased or sold. In this example, you will pay a transaction fee at the time of buying orselling each of the stocks you identify. You can only buy or sell one stock in one transaction, but it can include multiple shares. If you are buying stock A and stock B, at least two transactions will occur. In this example, you have a maximum of $5000 to spend across all of your stock purchases and your total costs should not exceed the $5000 limit.

Stock Selection and Fees Chart (3 points)

Paper Requirements:

• Write a 1-page minimum (double spaced, 12-point font) paper discussing what you found about buying the stocks you chose. Your paper should cover the following points:
  • Describe the stock portfolio you just created.
  • Which type of order, limit or market,are yougoing to use to buy the stocks? Why?What would be different if you used the other type of order?
  • What did you learn from creating this chart?

Question 2:

Congrats – you have just graduated from MSU and will be starting at MSU as a full-time employee. For this question, you are going to create a retirement portfolio using the MSU employee retirement plan. To develop your retirement portfolio, you need to:

• Follow My Personal Retirement Plan (Instructional Handout)to create a retirement plan:
  • Search for mutual funds, which fit your risk preference using the provided link for MSU retirement plan.
• Complete the Fund Allocation Chart (1 point).
• Complete the fund analysis chart for each fund you identify (5 points).
  • Attach a screenshot of the mutual fund quote (NAV and return)for each fund you identify (failure to attach a screen shot will result in a two-pointpenalty)
• Write a paper providing a detailed analysis describing your retirement plan and compare it against your stock portfolio. For the paper, you need to at least address the following points:
  • Identify at least one) mutual fund (or more) to fund your retirement. In your description, analyze each fund (and the funds attributes – price, type, fees, return, etc.) and provide a rationale for why you selected the fund(s). (If you select only one fund, please state why you chose to only include one fund in your retirement plan)
  • Identify and explain one primary strength and one weakness of each fund
  • Explain the fee structure of your fund(s). For additional information on analyzing your mutual fund, you may find the FINRA Fund Analyzer helpful to you. https://tools.finra.org/fund_analyzer/
  • Describe how this plan supports your risk preference and financial goals.
  • Paper should be well developed and provide sound reasoning!

My Personal Retirement Plan (Instructional Handout):

Given your risk preference identified in Assignment #2, you are now invited to select investments on the Fidelity MSU Microsite. This is the same site that new MSU employee’s (who choose to work with Fidelity) use to select their investments for their retirement. The investment choices can be found at: https://nb.fidelity.com/public/nb/msu/planoptions/plandetails?planId=95378.

Within this option, there are three main types of mutual funds you can choose from:

• Target Date Retirement Funds- these funds have a strategy for risk based on the intended date of retirement for an individual. For example, if the Fund is called, Target Date 2055, this means the fund is geared towards individuals who are striving to retire in the year 2055. As a result, this fund’s allocation would be more investments that have a more aggressive objective now and as time passes, the allocation becomes more conservative the closer the time period gets towards retirement.

• Actively Managed Funds – these funds have a fund manager that is actively managing the fund. It is the fund manager’s job to watch the fund, make changes as they deem necessary, and follow the objective that has been identified for the fund. Watch out for the fees with actively managed funds! Sometimes actively managed funds have a higher expense ratio and load.

• Index Funds – these funds are passively managed meaning they are run by a computer and typically will follow an index (grouping of stocks in the market such as S&P 500, DJIA, or the Nasdaq). Index funds tend to have lower expense ratios and fees, but sometimes have a higher price per share (NAV) to purchase the funds.

To select the fund(s) for your retirement plan, click on the link for the type of fund that you are interested in. You may select fund(s) from one category or several categories.

I plan on allocating my employer sponsored retirement funds using the following allocation strategy.

Example A:

100%    Actively Managed Funds              Fidelity Growth Fund (FICXR)

Example B:

25%              Index                                             S&P Index fund (ABCDE)

25%              Growth                                          T Rowe Price Growth Fund (JKLFE)

50%            Growth and Income                          Vanguard Growth/Income (XLCFE)

You are welcome to choose as many funds as you desire, however, you must choose at least one fund in your allocation.

Fund Allocation Chart (1 point)

Part Three: Analyzing Investments

Using the specific funds you identified, provide some background information about the funds and identify why you chose the funds for your investment allocation. (Complete the fund analysis chart for each fund you select).

Fund Analysis Chart (5 points)

HDFS 238 Personal Finance

Rubric for Personal Financial Plan – Assignment #3

DUE:March 19^th at 11:59 pm EST; Total Points: 20 points