In this chapter, you learned how to use many tools for performing a financial analysis of a company. When making personal investments, however, it is most likely that you won’t be buying stocks and bonds in individual companies. Instead, when most people want to invest in stock, they buy mutual funds. By investing in a mutual fund, you reduce your risk because the fund diversifies by buying the stock of a variety of different companies, bonds, and other investments, depending on the stated goals of the fund.

Before you invest in a fund, you will need to decide what type of fund you want. For example, do you want a fund that has the potential of high growth (but also high risk), or are you looking for lower risk and a steady steam of income? Do you want a fund that invests only in U.S.

companies, or do you want one that invests globally? Many resources are available to help you with these types of decisions.

Instructions Go to http://web.archive.org/web/20050210200843/http://www.cnb1.com/invallocmdl.htm and complete the investment allocation questionnaire. Add up your total points to determine the type of investment fund that would be appropriate for you.

FASB CODIFICATION ACTIVITY