Expand mobile version menu
  Skip to main content

Mutual Fund Manager

Real-Life Activities

Real-Life Math -- Solution

In determining which of 2 companies is the better answer for your mutual fund or clients' portfolio, you will look at many factors. One of these is other analysts' recommendations. To see which bank has a stronger recommendation, perform the calculation this way:

  • Multiply each recommendation level using its rating system number times the number of analysts
  • Add up the total of that column
  • Add up the number of analysts
  • Divide the first total by the number of analysts

Save-Moor Bank

RecommendationsNumber of AnalystsSubtotal
Strong Buy(1)x3=3
Moderate Buy(2)x5=10
Hold(3)x18=54
Moderate Sell(4)x1=4
Strong Sell(5)x2=10
--------
Total:2981

81 (recommendations) / 29 (analysts) = 2.79

Happy Returns Bank:

RecommendationsNumber of AnalystsSubtotal
Strong Buy(1)x3=3
Moderate Buy(2)x4=8
Hold(3)x19=57
Moderate Sell(4)x2=8
Strong Sell(5)x0=0
--------
Total:2876

76 (recommendations) / 28 (analysts) = 2.71

Both stocks turn out to be a moderate buy. The Happy Returns Bank has the better recommendation (2.71 is closer to 1). Should you choose that one? Not yet. You have a lot of other research to do. How is the P/E and current and future EPS, for example? Your training and experience will have prepared you to evaluate the rest of the elements and make a confident recommendation.

Mutual fund managers deal with figures constantly, so they must have strong math skills. "Math is essential to be good at," says Sunil Vidyarthi. Vidyarthi is a chief investment counsel.


Contact

  • Email Support

  • 1-800-GO-TO-XAP (1-800-468-6927)
    From outside the U.S., please call +1 (424) 750-3900

Support


Powered by XAP

OCAP believes that financial literacy and understanding the financial aid process are critical aspects of college planning and student success. OCAP staff who work with students, parents, educators and community partners in the areas of personal finance education, state and federal financial aid, and student loan management do not provide financial, investment, legal, and/or tax advice. This website and all information provided is for general educational purposes only, and is not intended to be construed as financial, investment, legal, and/or tax advice.