INVESTING COSTS. Fund 2: S&P 500 Index Fund. No front-end load No back-end load Passively managed No Annual Account Fees 0.

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1 Test Drive Overview Students are offered three investment options and form groups based on their selection. See which group can most closely guess the cost of their investment option after 30 years. Utilize the Investment Diagrams to learn about the three investment options. Turn-by-Turn Navigation 1. Read the scenario and vocabulary below. Scenario: At the start of your first job, you save $3,000 per year into a 401(k) account. Each year, you increase that amount by $250. This continues every year for 30 years. In this example, the investment earns a 7 percent gross return each year. Vocabulary Trading Fees: Costs associated with buying or selling stock. Front-end load: Commission fee when buying stock. Back-end load: Commission fee when selling stock. On-going Fees: Ongoing costs associated with owning a particular stock. Expense Ratio: The ratio of fund expenses to fund assets. Advisory Fees: Typically a percent of investor s assets. Annual account fee: Flat annual fee amount. Actively Managed: Investments with a fund manager frequently trading in the fund to maximize returns. Passively Managed: Investments that automatically follow trading rules such as mirror a sector of the market. 2. What would be the value of this retirement investment after 30 years assuming there were absolutely no fees? This is our baseline number. (Answer can be found at the bottom of the table for Fund 0.) 3. Each student chooses one of the three funds available to fully invest their retirement savings. Fund 1: Average mutual fund picked by financial advisor Passively managed 0.75% expense ratio Fund 2: S&P 500 Index Fund Passively managed 0.1% expense ratio Fund 3: Mutual fund actively managed by well-known fund manager Actively managed 1.5% expense ratio 4. Each student should write down a guess for the total cost of fees that would accumulate for their fund after 30 years. Fund Chosen: Guess of Total Fees in 30 years $ 5. Divide up into groups according to the fund chosen and pick a team captain. 6. Distribute the handouts for each fund to the captains to help answer the following questions. 7. What is the Net Return percentage for each fund? Fund 1: Fund 2: Fund 3: 8. What is the total cost in fees for each fund after 30 years: Fund 1: $ Fund 2: $ Fund 3: $ 9. What is the total cost in fees as a percentage of the baseline amount the investment would be worth, if there were no fees? Fund 1: % Fund 2: % Fund 3: % 10. Who had the closest guess to the total fees for their team s fund? How much was the difference between the guess and actual? Fund 1: Fund 2: Fund 3: 11. The team with the smallest difference to the actual amount is the winner. 12. Now, understanding the fees associated with each fund, which one would you choose?

2 Fund 0: Fund with No Fees (baseline) 7.00% 0.00% 7.00% $ 3, $ $ 3, $ 6, $ $ 6, $ 10, $ $ 11, $ 14, $ 1, $ 15, $ 19, $ 1, $ 21, $ 25, $ 1, $ 27, $ 31, $ 2, $ 34, $ 38, $ 2, $ 41, $ 46, $ 3, $ 49, $ 55, $ 3, $ 58, $ 64, $ 4, $ 68, $ 74, $ 5, $ 79, $ 85, $ 6, $ 91, $ 98, $ 6, $ 105, $ 111, $ 7, $ 119, $ 126, $ 8, $ 134, $ 141, $ 9, $ 151, $ 159, $ 11, $ 170, $ 177, $ 12, $ 190, $ 197, $ 13, $ 211, $ 219, $ 15, $ 235, $ 243, $ 17, $ 260, $ 269, $ 18, $ 287, $ 296, $ 20, $ 317, $ 326, $ 22, $ 349, $ 358, $ 25, $ 383, $ 393, $ 27, $ 420, $ 430, $ 30, $ 460, $ 470, $ 32, $ 503, $ 513, $ 35, $ Value (yr 30) $ Fees Lost $ - 0%

3 Fund 1: Average Mutual Fund Picked by financial advisor 7.00% 0.75% 6.25% $ 3, $ $ 3, $ 6, $ $ 6, $ 10, $ $ 10, $ 14, $ $ 15, $ 19, $ 1, $ 20, $ 25, $ 1, $ 26, $ 31, $ 1, $ 33, $ 37, $ 2, $ 40, $ 45, $ 2, $ 48, $ 53, $ 3, $ 56, $ 62, $ 3, $ 66, $ 71, $ 4, $ 76, $ 82, $ 5, $ 87, $ 93, $ 5, $ 99, $ 106, $ 6, $ 112, $ 119, $ 7, $ 126, $ 133, $ 8, $ 142, $ 149, $ 9, $ 158, $ 166, $ 10, $ 176, $ 184, $ 11, $ 196, $ 204, $ 12, $ 216, $ 225, $ 14, $ 239, $ 247, $ 15, $ 263, $ 271, $ 16, $ 288, $ 297, $ 18, $ 316, $ 325, $ 20, $ 346, $ 355, $ 22, $ 377, $ 387, $ 24, $ 411, $ 421, $ 26, $ 448, $ 458, $ 28, $ 487, Fund 1 Value (yr 30) $ 487, Fees Lost $ 62, %

4 Fund 2: S&P 500 Index Fund 7.00% 0.10% 6.90% $ 3, $ $ 3, $ 6, $ $ 6, $ 10, $ $ 11, $ 14, $ 1, $ 15, $ 19, $ 1, $ 21, $ 25, $ 1, $ 27, $ 31, $ 2, $ 33, $ 38, $ 2, $ 41, $ 46, $ 3, $ 49, $ 54, $ 3, $ 58, $ 64, $ 4, $ 68, $ 74, $ 5, $ 79, $ 85, $ 5, $ 91, $ 97, $ 6, $ 104, $ 110, $ 7, $ 118, $ 125, $ 8, $ 133, $ 140, $ 9, $ 150, $ 157, $ 10, $ 168, $ 176, $ 12, $ 188, $ 196, $ 13, $ 209, $ 217, $ 15, $ 232, $ 240, $ 16, $ 257, $ 266, $ 18, $ 284, $ 293, $ 20, $ 313, $ 322, $ 22, $ 344, $ 353, $ 24, $ 378, $ 387, $ 26, $ 414, $ 424, $ 29, $ 453, $ 463, $ 31, $ 495, $ 505, $ 34, $ 540, Fund 2 Value (yr 30) $ 540, Fees Lost $ 8, %

5 Fund 3: Mutual Fund Actively Managed by Well-Known Fund Manager 7.00% 1.50% 5.50% $ 3, $ $ 3, $ 6, $ $ 6, $ 10, $ $ 10, $ 14, $ $ 15, $ 19, $ 1, $ 20, $ 24, $ 1, $ 26, $ 30, $ 1, $ 32, $ 36, $ 2, $ 39, $ 44, $ 2, $ 46, $ 51, $ 2, $ 54, $ 60, $ 3, $ 63, $ 69, $ 3, $ 72, $ 78, $ 4, $ 83, $ 89, $ 4, $ 94, $ 100, $ 5, $ 106, $ 113, $ 6, $ 119, $ 126, $ 6, $ 133, $ 140, $ 7, $ 148, $ 155, $ 8, $ 164, $ 172, $ 9, $ 181, $ 189, $ 10, $ 200, $ 208, $ 11, $ 219, $ 228, $ 12, $ 240, $ 249, $ 13, $ 263, $ 272, $ 14, $ 287, $ 296, $ 16, $ 312, $ 322, $ 17, $ 340, $ 349, $ 19, $ 369, $ 379, $ 20, $ 399, $ 410, $ 22, $ 432, Fund 3 Value (yr 30) $ 432, Fees Lost $ 116, %

Mutual Fund Basics. Types of mutual funds. What are the benefits of investing in a mutual fund?

Mutual Fund Basics. Types of mutual funds. What are the benefits of investing in a mutual fund? EBNY Financial, LLC Kevin Kautzmann, CFP Certified Financial Planner 80 Fifth Avenue #1403 New York, NY 212-269-2625 kevin@ebnyfinancial.com www.ebnyfinancial.com Mutual Fund Basics Page 1 of 5, see disclaimer