Minimodule: Profit in a Mutual Fund

Table 1 is a simulation of an annual statement from a mutual fund that invests primarily in stocks. On 6/25, a dividend of $0.20 per share was awarded. Since the investor owned 779.834 shares, the dollar amount of the transaction was (779.834)($0.20) = $155.97. At $32.46 a share, this dollar amount of the transaction was converted into 155.97/32.46 = 4.805 additional shares, for a total of 4.805 + 779.834 = 784.639 shares. Similarly, on 12/15 a dividend was awarded yielding 82.847 additional shares, so the total shares owned at the end of the year was 867.486. (For a more complete introduction to a mutual fund statement, see Vest [2011].)

Notes for the Instructor

This article is a companiontoVest [2011]. Both are about the same annual stock mutual fund statement, but each from a different point of view. Have your students set up a lifetime file on personal finance and include this article. Students can study the history of earnings by stock market indexes at http://www.wikipedia.org and http://www.investopedia.com (type in "Dow Jones Industrial Average" and "S&P 500 Index of Stocks"). The history of index funds that invest in major stock indexes can be found at http://www.vanguard.com.