Mutual funds and the companies listed in the Dow 30 all fall under a specific type of asset classes we all need to know about. Once we have determined the type of investor we are, we can then determine what fits our needs in terms of investments and what kind of benefits we are seeking in return.
The mutual funds and companies listed under the Dow 30 all fits the investor one way or the other and in the following, I will determine the asset classes for my selected mutual fund and Dow 30 organization. I will also explain how their classifications and the current investment environment impacts organizational decisions concerning the composition of its portfolio. Northern Funds Mutual Funds Company
Northern Trust Corporation is a leading provider of investment management, asset, and fund administration, fiduciary and banking solutions for corporations, institutions, and affluent individuals worldwide (Northern Trust, 2006). Northern Trust, a multibank holding company is based in Chicago and has a network of 84 offices in 18 U.S states and has international offices in 12 locations in North America, Europe, and the Asia-Pacific region. As of June 30, 2006, Northern Trust has $53 billion in banking assets, $3.2 trillion in assets under custody, and $640 billion in assets under management.
Northern Funds offers its customers all three asset classes of mutual funds and they are equity funds, fixed-income funds, and money-market market funds. Equity funds are defined as a mutual fund that invests in a broad, well-diversified group of stocks. Fixed-income funds are funds that invest primarily in government and corporate debt. While fund holdings may appreciated in value, the primary objective of these funds is to provide a steady cashflow to investors (Investopedia, 2006). These fixed-income funds are geared towards the conservative and retirees. Money market funds consist of short-term debt instruments, mostly in the form of Treasury bills.
As with choosing mutual funds and the type of asset classes they fall under, along comes with how classifications and the current investment environment impact organizational decisions regarding the composition of its portfolios.According to an article on the Northern Funds website, they state that their money market funds offer a very competitive rate of return after 17 quarter point rate hikes by the Federal Reserve.
They continue to state that the investment in the money market funds may be the safest aspect due to investors fretting over a mild uptick in inflation and modest slowdown in growth. With taxable money market funds yielding 4.4 percent in June, cash is returning almost 1 percentage point more than inflation. That amount could climb even higher if consumer prices level off and the economy slows as expected later this year (Northern Funds, 2006). General Motors, A Dow 30 Organization
General Motors Corporation is the world’s largest automaker and has been the global industry sales leader for past 75 years. The company was founded in 1908 and currently employs about 327,000 people around the world. With headquarters in Detroit, MI, GM manufactures its cars and trucks in 33 countries worldwide. GM also operates one of the world’s leading financing companies, GMAC Financial Services, which offers automotive, residential, and commercial financing and insurance (GM, 2006).
One of the Dow 30 organization, General Motors Corporation offers its investors stocks. Stocks are defined as a type of security that signifies ownership in a corporation and represents a claim on part of the corporation’s assets and earnings (Investopedia, 2006). Stocks come in two forms and they are common and preferred. Common stock enables the shareholder the right to vote during shareholder’s meetings and they are entitled to receive dividends. Preferred stocks do no have voting rights but it has a higher claim on assets and earnings.
In choosing to invest in General Motors Corporation, there are a couple of concerns here as far as the current investment environment goes. General Motors has seen its share of global overcapacity, falling prices, rising health-care costs, higher fuel prices, and global competition. As a result of these problems, the company has seen a loss of $3.4 billion, excluding special items, and a reported loss of $10.6 billion, on revenues of $192.6 billion (GM, 2006).
The specific problem of higher fuel prices within the car industry affects all auto makers due to consumers looking for a more cost-efficient mode of transportation. Consumers are not willing to buy a big car/truck with a high consumption of fuel due to the fact that the cost of fuel is relatively high. With this negative impact on the auto industry, this affects consumers not willing to buy a GM specific car which in turn affects the company’s overall earnings. Conclusion
In conclusion, I have depicted the different types of asset classes for the mutual fund I selected as well as the Dow 30 organization. An asset class exists so that it can provide a structure to the vast array of financial instruments that are available in today’s financial market (Investopedia, 2006). As with any types of investments, they all has its risks and rewards and it is a matter of understanding how they are classified as well as its current investment environment.
ReferencesGeneral Motors Corporate Information (2006) Retrieved on October 15, 2006 from http://www.gm.com/company/corp_info/ General Motors Letters to Stockholders (2006) Retrieved on October 15, 2006 from http://www.gm.com/company/investor_information/docs/fin_data/gm05ar/content/letter/letter_01.html Investopedia: Equity Fund (n.d) Retrieved on October 15, 2006 from http://www.investopedia.com/terms/e/equityfund.asp Investopedia: Stock (n.d) Retrieved on October 15, 2006 from http://www.investopedia.com/terms/s/stock.asp Investopedia: Mutual funds Different types of funds. (n.d)
Retrieved on October 15, 2006 from http://www.investopedia.com/university/mutualfunds/mutualfunds1.asp Northern Trust: About Us (2006) Retrieved on October 15, 2006 from http://www.northerntrust.com/pws/jsp/display2.jsp?TYPE=interior&XML=pages/nt/0601/1136383727252_494.xml Northern Trust: Northern Updated (2006) Retrieved on October 15, 2006 from http://www.northernfunds.com/resources/update/Update_Q206/NU_2Q06_feature_05.html