Risk and return - investment advantage/disadvantages

There are two different funds listed below for you to choose to invest in.

Question: What are the advantages and disadvantages of choosing the Arias Large Company Stock Fund compared to the Arias S&P 500 Index Fund?

- Arias S&P 500 Index Fund - this mutual fund tracks the S&P 500. Stocks in the fund are weighted exactly the same as they are in the S&P 500, minus expenses. With an index fund, the manager is not required to research stocks and make investment decisions, so fund expenses are usually low. This fund charges expenses of 0.20 percent of assets per year.

- Arias Large-Company Stock Fund - this fund invests primarily in large capitalization stocks of companies based in the US. The fund is managed by Melissa Arias and has outperformed the market in six of the last eight years. The fund charges 1.50% in expenses.

© SolutionLibrary Inc. solutionlibary.com 9836dcf9d7 https://solutionlibrary.com/business/strategy-and-business-analysis/risk-and-return-investment-advantage-disadvantages-7gl7

Solution Preview

... can research (perhaps even visit) the companies and thereby develop an intimate knowledge of the quality of each company's earnings and management. Also, if the stocks chosen from the large capitalization sector outperform the general market, the investor in this fund may gain a greater amount of return, even after expenses, than an investor in a more generally-focused fund such as the S&P 500 Index Fund. Finally, because this fund carries a higher expense ratio than the S&P 500 Index Fund, if both funds achieve the same return before fees, ...