This paper presents a process that can be used as a "tool" or "framework" by individuals with diverse goals who are looking for small or large investments and who are new to the world of mutual funds. Mutual funds provide an avenue from which to meet both short and long term financial needs. This begins by creating an investment plan which helps to identify the goals, critical in this decision making process; this paper identifies goals through an investor survey. The responses are then used to develop individual utility functions that establish an investor's profile for various sizes of investments; investors may be risk tolerant with small investments but rather risk sensitive with large investments. The survey responses are also weighted, normalized, and applied to a non-linear equation to determine each investors' tolerance to risk. Pairwise comparison of six mutual fund risk factors are also examined, normalized, and used to determine the tolerance of risk to the investor. The utility function and weights are then applied to a set of mutual funds for a recommended mix of funds for investment. The recommended strategy is made in conjunction with the fund's historical trends, the sensitivity of the fund in relation to the market and economic fluctuation, the turnover rate, .and the mutual fund's management strategy and stability. Six separate case studies are evaluated through this process, as well as benchmark studies representing conservative, neutral, and aggressive investors. Mutual Fund
Baktir, Elif; Fant, Karla; Lill, Jim; Miller, Barbara; Nahas, Steven; and Trujillo, Gloria, "Mutual Fund Selection Decisions" (2000). Engineering and Technology Management Student Projects. 2127.