Eileen Ponders Mutual Funds

Eileen Mahurin is the director of a major charitable organization in Knoxville, Tennessee. 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, series EE bonds, and a little bit about mutual funds, she approaches you for some investment advice.

Critical Thinking Questions

In view of Eileens long-term investment goals, do you think mutual funds or ETFs are the more appropriate investment vehicle for her?

Do you think that she should use her $15,000 savings to start a mutual fund or an ETF investment program?

What type of mutual fund or ETF investment program would you set up for Eileen? In your answer, discuss the types of funds youd consider, the investment objectives youd set, and any investment services (such as withdrawal plans) youd seek. Would taxes be an important consideration in your investment advice? Explain.

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