Case Study K: Eileen Ponders Mutual Funds

Eileen Moriarty is the director of a major charitable organization in Burlington, Vermont. A single mother of one young child, she earns what could best be described as a modest income. Because charitable organizations arent known for their generous retirement programs, Eileen has decided it would be best for her to do a little investing on her own. Shed like to set up a program to supplement her employers retirement program and, at the same time, provide some funds for her childs college education (which is still 12 years away). Although her income is modest, Eileen believes that with careful planning, she could probably invest about $250 a quarter, and she hopes to increase this amount over time. Eileen now has about $15,000 in a bank savings account, which shes willing to use to kick off this program. In view of her investment objectives, she isnt interested in taking a lot of risk. Because her knowledge of investments extends no further than savings accounts, she approaches you for some investment advice.

Critical Thinking Questions

Explain to Eileen the key reasons for purchasing mutual fund or ETF shares.

What types of mutual funds or ETFs would you recommend to Eileen?

Explain to Eileen the selection process for making mutual fund and EFT investments.

Do you think some type of real estate investment would make sense for Eileen? If so, what type would you suggest? Explain.