| Mutual funds are investments that come at | | | | the synthetic method and the operating indexing. |
| different prices depending on the type of | | | | This is a method of comparing a company's |
| securities they are invested in. Other factors that | | | | financial performance against that of other |
| help determine the prices are the prevailing | | | | companies. If it more favorable, prices are likely |
| market forces. The prices are also to some point, | | | | to go higher. There are advantages associated |
| influenced by the classes of the funds. This | | | | with this method of pricing and one of them is |
| means that the classes have the same rights and | | | | that there are low costs involved. This reflects |
| shareholder servicing fees and the difference | | | | directly on the investors returns because, it then |
| comes in the sales charges and distribution | | | | means that they get to pay less in terms of |
| charges. | | | | management expenses and fees and hence they |
| The prices are best determined through a | | | | get a bigger portion of returns. There is also |
| method known as indexing. Indexing is the | | | | simplicity in understanding the process of indexing |
| practice of shareholding a representative collection | | | | as well as pricing. |
| of securities. There are different methods of | | | | There is need for investors to understand that, |
| doing so and depending on how the indexing is | | | | low prices do not necessarily mean good |
| done, prices will most definitely differ. Synthetic | | | | performance of a mutual fund, neither do high |
| indexing for example translates to higher yielding | | | | prices mean poor performance. The best way to |
| instruments as this means that taxes will be | | | | go about determining which prices are likely to |
| withheld. | | | | favor you as the investor and the way to do this |
| Other methods of indexing include the enhanced | | | | is to study the past performance of the |
| indexing, which is the more improved version of | | | | investment over the years. |