Finance Case Study Assignment Help On Investment

Get case study assignment help of the following questions :

1. What implications do you draw from the graph for mutual fund investors?

2. Is the graph consistent or inconsistent with market efficiency? Explain carefully.

3. What investment decision would you make for the equity portion of your 401k account? Why?

Finance Case Study Assignment Help On Investment Paper : Implications from Graph for Mutual Fund Investors The given graph between the actively managed funds and Vanguard 500 Index Fund has significant implications for the mutual funds investors. The graph exhibits that returns of funds are declined from the year 1986 to 1998, but after that returns are increased till the year 2006. In the context of mutual funds, all the investors who invested in equity mutual funds during the period of 1986 to 1998 got negative returns from the investment due to decline in index value or returns (Reilly & Brown, 2011). Along with this, the performance of Vanguard 500 index fund has also declined in same duration that influenced returns of equity mutual funds.


On the other side our assignment help experts says that, the graph also depicts that the mutual funds investors who invested in the market during 1998 to 2006 earned positive returns due to increase in returns of market index. From the graph, it is observed that overall market index outperformed in the given time period. The given graph is significant for those investors who want to invest in mutual funds by understanding the historical performance of equity mutual funds in terms of return before making any selecting any fund for investment (Melicher & Norton, 2010). Along with this, the given graph is also significant for the investors to identify and understand risk profile of each equity mutual funds, which are available in the market for investment (Elmiger & Kim, 2002). Additionally, it is also significant for the mutual funds investors to know about the associated fees of equity mutual funds as well as other available option of index funds. It is because the market must exceed the market return of 1.67 percent (before fees) to receive a return after the fees (Reilly & Brown, 2011).


Consistency or Inconsistency with Market Efficiency: The given graph is consistent with market efficiency, but at limited extent. It is because; returns of different funds or stocks are changed according to changes in market returns during the period of 1986 to 2006. Additionally, the graph is consistent due to the dependability of returns of actively managed equity funds on market efficiency of stock market index as well as fluctuation in returns (Balling, 2004). According to efficient market hypothesis (EMH), the return of funds is consistent with strong, semi and weak forms of market efficiency due to similar in behavior. Along with this, it is also observed that investor’s returns decrease with decline in returns of the market index, while increase with rising in index’s returns due to impact of market (Ross, Jaffe & Westerfield, 2001).


Investment Decision for the Equity Portion: An individual investor would make certain investment decisions for the equity portion of the 401k account. From the discussion of implication of graph and consistency or inconsistency of returns with market efficiency, it is concluded that the investor would make investment in a diversified portfolio by making investment in equity funds, bonds and money market under the company’s 401(k) plan (Moyer, McGuigan & William 2012). For instance, the investor would invest in the S&P 500 index fund as well as other stocks in order to diversify portfolio. With the help of diversification, the investor would be able to reduce risk and increase possibility to earn higher returns (Wahlen, Stickney, Baginski & Bradshaw, 2011). In this way, 70% of total investment of 401k account would invest in equity mutual funds or stocks due to lower degree of investment risks in the market. Additionally, these mutual funds provide a fixed amount of return to the investors that would be beneficial in this case. On the other hand, only 5% of amount would invest in money market instruments in order to earn higher returns with high level of market risks. Along with this, to take the investment decision, the investor would also focus on the equity investment on the large-cap stocks. In this manner, he would also select the S&P 500 index fund of the large company stock fund (Wahlen, Stickney, Baginski & Bradshaw, 2011). So, due to benefits of diversifying portfolio, the investment would make in different funds and bonds to earn higher returns at limited level of risk.


References: Balling, M. (2004). Financial Markets in Central and Eastern Europe: Stability and Efficiency. UK: Routledge. Elmiger, G. & Kim, S.S. (2002). RiskGrade Your Investments: Measure Your Risk & Create Wealth. USA: John Wiley & Sons. Jaffe, J., Westerfield, R., & Ross, R. (2004). Corporate Finance. USA: Tata McGraw-Hill Education. Melicher, R.W. & Norton, E.A. (2010). Introduction to Finance: Markets, Investments, and Financial Management. USA: John Wiley and Sons. Moyer, M.R.C, McGuigan, J.R. & William J. (2012). Contemporary Financial Management. USA: Cengage Learning. Reilly, F.K. & Brown, K.C. (2011). Investment Analysis and Portfolio Management (with Thomson One – Business School Edition and Stock-Trak Coupon). USA: Cengage Learning. Wahlen, J.M., Stickney, C.P., Baginski, S.P., & Bradshaw, M. (2011). Financial Reporting, Financial Statement Analysis, and Valuation: A Strategic Perspective. USA: Cengage Learning. Ross, S.A., Jaffe, J & Westerfield, R.W. (2001). Corporate Finance (6th ed.). USA: McGraw-Hill Professional.


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