Jason Heimberg’s grandmother died and left him $30,000. Jason needed $5,000 of the inheritance to finish his last year at County Community College. He had $25,000 left to invest. Jason investigated several stocks that he felt were likely to grow rapidly. Most were high-tech stocks in industries such as gene splicing and robotics. Jason’s stockbroker encouraged him to diversify his investments by buying stock in two mutual funds. One was a fund that specializes in smaller-growth companies. Another specialized in bonds.

A broker Jason met at a party suggested that he really need not use a broker at all. Her suggestion was to keep some funds in the bank for his use in an emergency. Other funds could be invested in several different mutual funds that were managed by one firm. She called them no-load mutual funds and explained that they could be bought for no brokerage fee. She said the funds have an NL notation in the various mutual fund quotations, as found in The Wall Street Journal.

A financial adviser has suggested that Jason buy insurance first, even though he is not married. The idea was to buy a policy that would invest money for Jason at what looked like a reasonable return. Any excess funds would be placed in a bank (for emergencies) and in mutual funds that the adviser would recommended.

Discussion Questions

1. What are the criteria Jason should use in evaluating investment alternatives?

2. What questions does this case raise that you need to have answered before you can invest your funds more intelligently? Where could you find answers to such questions?