| Course | FIN 340 Fundamentals of Investments |
|---|---|
| Module | Module 2 |
| Paper type | undergraduate assignment comparing investment vehicles and their costs |
| Length | About 1,030 words, 6 pages |
| Format | APA 7 student paper |
| School | Southern New Hampshire University |
| Program | BS Finance |
| Updated | October 2026 |
Free sample paper for FIN 340 Module 2
Reading a 401(k) Menu: Vehicles, Holdings and the Cost of Fees
[Student Name]
Southern New Hampshire University
FIN 340: Fundamentals of Investments
Module Two Assignment
[Instructor Name]
[Date]
The organization, setting and figures below are a composite written as a model document. No real employer, client, colleague or patient is described.
Reading a 401(k) Menu: Vehicles, Holdings and the Cost of Fees
Introduction
Tessa Lindqvist, a composite 29-year-old dental hygienist in Keene, New Hampshire, has just enrolled in her employer's 401(k). She contributes 6 percent of her $72,000 salary, about $360 a month, and her employer adds $140, so $500 goes into the plan each month. The plan offers eight investment options and a default target-date fund. This paper explains how each type of vehicle on the menu works, what it holds and what it costs, shows how the differences in cost compound over Tessa's working life and recommends a choice.
The Menu
Tessa's 401(k) investment menu
| Option | Vehicle type | What it holds | Expense ratio |
|---|---|---|---|
| Large Cap Growth Fund | Actively managed mutual fund | About 60 large U.S. growth stocks chosen by a manager | 0.78% |
| S&P 500 Index Trust | Collective investment trust | The 500 stocks in the S&P 500 in index weights | 0.04% |
| International Index Fund | Index mutual fund | Large and mid-size companies in developed markets outside the U.S. | 0.10% |
| Total Bond Index Fund | Index mutual fund | U.S. Treasury, agency, mortgage and investment-grade corporate bonds | 0.05% |
| Stable Value Fund | Insured fixed income account | Short and intermediate bonds wrapped by insurance contracts | 0.35% |
| Target-date 2055, 2060 and 2065 Funds | Fund of index funds | U.S. and international stocks and bonds, shifting toward bonds over time | 0.12% |
Actively Managed Mutual Fund
A mutual fund is an investment company that pools money from many investors and buys a portfolio. Investors buy and sell shares directly with the fund at its net asset value, calculated at the end of each trading day. The Large Cap Growth Fund is actively managed: its manager picks about 60 stocks expected to outperform. Its 0.78 percent expense ratio pays for research and trading. Carhart (1997) found that, after accounting for common factors such as momentum, expenses reduce mutual fund returns roughly one for one, and that little of the remaining difference persists from year to year. French (2008) estimated that U.S. investors spent about 0.67 percent of the value of the stock market each year from 1980 to 2006 trying to beat it, money that as a group they could not earn back, since investors as a whole own the market.
Index Funds and the Collective Trust
An index fund buys every stock or bond in an index in proportion to its weight, so it simply matches the market's return minus costs. The S&P 500 Index Trust is not a mutual fund but a collective investment trust, a pooled fund run by a bank or trust company for retirement plans only. It is regulated by banking regulators and the Department of Labor rather than registered with the SEC, does not need to print a prospectus and can therefore charge less, here 0.04 percent. For Tessa the difference in structure matters little; what matters is that it holds the same stocks as an S&P 500 index mutual fund at a lower cost. The International Index Fund and the Total Bond Index Fund are ordinary index mutual funds.
An exchange-traded fund would hold a similar index but trade on a stock exchange throughout the day like a stock. ETFs are useful in a taxable brokerage account because of their tax efficiency, but they offer no advantage inside a 401(k), where taxes are deferred anyway, which is why this plan does not offer them.
Bond and Stable Value Funds
The Total Bond Index Fund holds thousands of high-quality bonds. Its price falls when interest rates rise, as it did by about 13 percent in 2022, but it pays steady interest and usually moves less than stocks. The Stable Value Fund holds similar bonds but adds insurance contracts that let participants withdraw at book value, so its share value does not fall. It pays a credited rate, recently around 3 percent, that changes slowly. It suits someone near retirement who needs stability, but for a 29-year-old it would likely earn too little over decades.
Target-Date Funds
A target-date fund is a fund of funds: the 2060 fund, for workers retiring around 2060, holds about 90 percent stocks and 10 percent bonds today and will shift gradually toward bonds as 2060 approaches. It rebalances automatically. Its 0.12 percent fee covers both the underlying index funds and the allocation service. It is designed to be an investor's entire portfolio.
What Fees Cost Over 36 Years
Assume Tessa contributes $500 a month for 36 years, until age 65, and that the funds earn 7 percent a year before costs. The only difference is the expense ratio.
Ending balance after 36 years of $500 monthly contributions, 7% gross return
| Expense ratio | Example fund | Ending balance |
|---|---|---|
| 0.04% | S&P 500 Index Trust | About $962,000 |
| 0.12% | Target-date 2060 Fund | About $944,000 |
| 0.45% | A typical balanced fund | About $870,000 |
| 0.78% | Large Cap Growth Fund | About $804,000 |
The 0.74 point difference between the cheapest and most expensive stock funds costs about $158,000, or 16 percent of the final balance. The active fund would need to beat its index by 0.74 percentage points every year for 36 years just to break even, which Carhart's evidence suggests few funds do.
Recommendation
Tessa should put her contributions in the Target-date 2060 Fund. It gives her a diversified, mostly stock portfolio suited to her long horizon, it rebalances without any action on her part, and it costs only 0.12 percent. Because she is anxious about losses, a fund that she can set and leave alone is less likely to be sold in a panic. She should not combine it with other funds: Benartzi and Thaler (2001) found that participants often split money evenly across a menu, and adding the bond or stable value fund to a target-date fund would make her portfolio more conservative than the fund intends. If she later wants a lower cost, a mix of the S&P 500 Index Trust, the International Index Fund and the bond fund could replicate the target-date fund for about 0.06 percent, but only if she rebalances it herself.
Conclusion
The funds on Tessa's menu differ more in cost and design than in what they ultimately hold. For a young investor contributing for decades, a low-cost, diversified target-date fund is the vehicle most likely to turn her $500 a month into a secure retirement.
References
Benartzi, S., & Thaler, R. H. (2001). Naive diversification strategies in defined contribution saving plans. American Economic Review, 91(1), 79-98. https://doi.org/10.1257/aer.91.1.79
Carhart, M. M. (1997). On persistence in mutual fund performance. The Journal of Finance, 52(1), 57-82. https://doi.org/10.1111/j.1540-6261.1997.tb03808.x
French, K. R. (2008). Presidential address: The cost of active investing. The Journal of Finance, 63(4), 1537-1573. https://doi.org/10.1111/j.1540-6261.2008.01368.x
What the FIN 340 Module 2 instructions ask for
The Module Two assignment in FIN 340 commonly asks you to describe the main types of investment vehicles, such as stocks, bonds, mutual funds, exchange-traded funds and money market instruments, and to compare their features for an investor. Directions may ask about how securities are bought and sold, the difference between open-end funds, closed-end funds and ETFs, or the effect of fees, loads and taxes on returns. The strongest papers explain how each vehicle works, what it holds and what it costs, then apply the comparison to an investor's situation instead of stopping at definitions. A short calculation showing how costs compound over time is often the most persuasive part of the analysis.
How this FIN 340 Module 2 investment vehicles assignment example is built
The sample works from the composite client Tessa's new 401(k) menu: an active large-cap fund at 0.78 percent, an S&P 500 index collective trust at 0.04 percent, an international index fund, a bond index fund, a stable value fund and three target-date funds near 0.12 percent. It explains each structure and what it holds, including why a collective trust is cheaper but not a mutual fund. It then computes that $500 a month for 36 years at a 7 percent gross return grows to about $962,000 at the lowest fee and about $804,000 at the highest, a $158,000 difference. The paper recommends a target-date fund for Tessa and explains why mixing it with other funds defeats its purpose.
Where the FIN 340 Module 2 rubric puts the points
The grading rubric for this assignment usually looks at accurate description of investment vehicles, correct comparison of features such as diversification, liquidity, cost and taxes, application to an investor, quantitative support and clarity of writing. High marks go to papers that explain how each vehicle is built and priced, use real or realistic cost figures and connect the comparison to an investor's needs. Points are lost for definitions copied from a glossary, for ignoring costs, for confusing an exchange-traded fund with an index fund and for recommendations with no reason. Organization, a summary table and correctly formatted APA citations account for the remaining credit in most versions. Instructors also tend to reward a recommendation that admits a trade-off, such as giving up a little cost savings for automatic rebalancing.
FIN 340 Module 2 help: the mistakes that cost points
A common shortfall is describing ten investment types in a paragraph each and never choosing among them. Narrow the comparison to the vehicles your investor can actually use, such as the funds in a retirement plan menu or a brokerage account, and compare them on the same few features. Show costs as expense ratios and then in dollars over a realistic horizon, because a fraction of a percent looks trivial until it compounds. Explain the difference between how a fund is structured and what it holds, since an index fund can be a mutual fund, an ETF or a collective trust. End with a recommendation for the investor, stated in a sentence that names the vehicle and the reason.
Get FIN 340 Module 2 written to your instructions
Send the FIN 340 Module 2 directions and the funds or securities your case lists. We explain each vehicle in plain terms, compare costs with real arithmetic and recommend one for the client in your scenario. Two days or so, first assignment free. The paper above is an original model document written by our desk, not a submitted student paper and not an official Southern New Hampshire University document.
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FIN 340 Module 2 questions, answered
Where can I find a free FIN 340 Module 2 Investment Vehicles sample?
The full FIN 340 Module 2 paper is here: a 401(k) fund menu compared by structure, holdings and cost, with fee compounding worked out over 36 years.
What is the difference between a mutual fund and an ETF?
Both pool investors' money in a portfolio, but mutual fund shares are bought and sold with the fund at the day's closing value, while ETF shares trade on an exchange throughout the day.
What is a collective investment trust?
A pooled fund run by a bank or trust company for retirement plans; it works like a mutual fund but is not registered with the SEC and usually costs less.
How much do fund fees matter?
A great deal over time. A difference of 0.74 percentage points a year can reduce a 36-year retirement balance by about 16 percent.
What is a target-date fund?
A single fund that holds stocks and bonds and gradually shifts toward bonds as its target retirement year approaches, designed to be an investor's whole portfolio.