Mutual funds have advantages over company stocks. In the offer of mutual funds investment, there is advanced portfolio management, investors can reinvest their dividends, they are safer since there is less risk, and the prices are fair and convenient. In mutual funds, the investing company collects money from different investors to invest in stocks, bonds and other forms of investment. The investors then receive returns according to investment strategies of the company (Pool, Sialm&Stefanescu, 2016). The mutual funds and company stocks both have their benefits in different ways. Company stocks allow the investor to own part of the business he or she is investing. Stocks have high returns, but they have more risks compared to bonds and mutual funds. There is a lot of fluctuation in stock investment. The value of the stock can rise or reduce anytime. An investor’s objective is to buy stocks and sell them at a higher to realize returns. Stocks also give the investor and advantage of receiving dividends from the profits of the company he or she invested.The investor has a chance of selling the stock in the future when the prices are higher, gaining ownership of the company as a shareholder, and receiving dividends from the profits of the company.
There are advantages that investing in Bledsoe Large company stock funds has over in Bledsoe S&P index 500 funds. Company stock funds are more flexible than index funds. Also, there are higher gains in investing in company stock funds as opposed to S & P index 500 funds. Disadvantages include; company stock funds have high risk than index funds, and they have higher fees than index funds. Investing in Bledsoe small cap mutual funds gives an investor the opportunity to access small company stocks and in the range of between 60% and 95%. The investor has the chance to also invest 10% of assets in countries outside U.S. the fund has an expense of i.70% and this negatively affects the decision of an investor to invest in the fund.
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Sharpe ratio = risk premium of an asset/ standard deviation
= Sharpe Ratio = (Rx – Rf) / Standard deviation
Where;
Rx = Expected portfolio return = 16%
Rf = Risk free rate of return = 3.2%
(16% - 3.2%)/ 65%
= 0.197
The Sharpe ratio is rated as bad since it is less than 1. The lower the ratio, the smaller the return on investment relative to the risk taken and vice versa. A higher ratio is more preferable. Sharpe ratio is used to maximize returns and to reduce volatility. It measures the performance of a portfolio and evaluates the investment (Kaplanski, Levy, Veld & Veld-Merkoulova, 2016).Investors to compare investment opportunities use Sharpe ratio. Investments with high Sharpe ratio are better for investors.
The best portfolio to invest in is Bledsoe Large-Company Stock Fund. This fund invests primarily in large- capitalization stocks of companies based in the United States. The fund is managed by Evan Bledsoe and has outperformed the market in six of the last eight years. The fund charges 1.50 per- cent in expenses. Compared to the other investments, large company stock funds have steady income because of having built up a solid market share. They also ensure there is a large market to trade funds as a result the large size of the company. The investor has a better chance of maximizing returns.
References
Kaplanski, G., Levy, H., Veld, C., & Veld-Merkoulova, Y. (2016). Past returns and the perceived Sharpe ratio. Journal of Economic Behavior & Organization , 123 , 149-167.
Pool, V. K., Sialm, C., &Stefanescu, I. (2016). It pays to set the menu: Mutual fund investment options in 401 (k) plans. The Journal of Finance , 71 (4), 1779-1812.
