lllCreativity in Action!

Using Creativity in
Developing the
Entrepreneurial Spirit

Learning in Action!
A Cross-disciplinary Problem-Based Learning
Environment for Entrepreneurship

The Case of the

Missing Mutual Fund

Test Version 1.0

(A Work in Progress)

(A Work in Progress)

R. Wilburn Clouse, PhD

Vanderbilt University
 The Case of the
Missing Mutual Fund
Storyline by Kathleen Armour-Spitzer

Introduction

We all know the importance of saving money for the future. After we graduate from
college or graduate school, and we actually have an income, saving seems like such a
mundane thing to do with our salary. We may be getting married, need to buy a new car,
or longing for our dream home. And unfortunately for many of us, there are student
loans to pay back. So, saving for the future may get relegated to the bottom of our
priority list. However, quite often there comes a time when we realize we just can’t put
off saving any longer.

For many of us, that time comes when we find out that we are expecting a baby.
Suddenly our new financial responsibilities abound. Will one of us quit our job to stay
home with the baby? Who will watch the baby if we both are working? How much does
it cost to raise a child? How will we provide for the baby if something happens to us?
How much will it cost to send our child to college? Will we choose public or private
school? New parents are faced with having to answer all of these questions regarding
their financial stability and oftentimes, it can be very overwhelming.

Sarah and Charles had been married for four years when they found out that they were
expecting their first child. They were both happy and excited, but a little nervous about
their new responsibilities. Both Sarah and Charles had good jobs, which provided them
with a very comfortable lifestyle. They had been saving money for retirement but until
they found out that they were expecting, they had not begun saving for a child.

Sarah and Charles sat down one night and tried to get a handle on their financial situation
so that they could begin to make some decisions about their future. Could they afford to
live on one income? How much would they have to save every month to afford a four-
year private college? How much was the new addition going to cost? After working
through these questions on their own, the couple decided that it would be wise to seek
professional financial advice.

Questions
1. How much do you think it costs to raise a child in the first year?

2. What other types of financial questions do you think Sarah and Charles need to
ask themselves?

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 3. What could be some possible investment tools that Sarah and Charles could use to
save for this child?

One of the financial tools recommended by their financial planner was to invest in mutual
funds. As they thought about the types of mutual funds that they would be interested in,
a new idea occurred to them. Wouldn’t it be great if there was a mutual fund which was
created with new parents in mind? Specifically, it would be made up of stocks from
companies that specialized in products and services for infants and children; for example,
companies such as McDonalds, Johnson & Johnson and Procter & Gamble. Sarah and
Charles felt that purchasing a mutual fund such as this would make sense as part of their
overall financial strategy because they would be investing in the types of companies that
provided the products and services they would need for their new baby.

Obviously, professionals would have to be brought in to set up the fund. Specifically, a

strategy would need to be created that defined the mutual fund and determined which
stocks would be eligible for inclusion in the fund. For example, a minimum percentage
of products that were devoted to infants and children would need to be defined, along
with overall guiding principles regarding management, strategic advantages, financial
strength, earnings potential and valuation levels.

Guiding Questions
1. What is a mutual fund and how does it work?

2. What are some other stocks that could be part of this mutual fund?

3. Besides mutual funds, what other investment tools would you recommend to
Sarah and Charles in order to diversify their financial portfolio?

Web Resources
http://finance.yahoo.com
Up to the minute market information and other relevant articles.

http://www.ucalgary.ca/MG/inrm/glossary/index.htm
A glossary of financial and insurance terms.

http://www.comfin.com
Various financial planning resources.

http://financialpassages.com.au
Has some financial planning information and budgeting calculators.

http://www.wsj.com
Contains pertinent financial information.

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http://businessweek.com
Contains pertinent financial information.
http://www/familyeducation.com/channel/0,2916,37,00.html
Has family financial planning information.

Resources

Karlitze, G., Honig, D. & Lewis, S. Growing Money: A Complete Investing Guide for
Kids.

Harman, H. Money Sense for Kids!

Smith, P. & Rony, L. Wow the Dow: The Complete Guide to Teaching Kids How to
Invest in the Stock Market.

Whitcomb, J. Capitate Your Kids: Teaching Your Teens Financial Independence.

Finch, P., Marshall, D. & Swartz, S. How to Raise Kids without Going Broke: The
Complete Financial Guide for Parents.

Resources for Teachers

http://www.dallasfed.org/educate/teachers.html

http://www.pfeg.org.uk

Product
1. Assume that Sarah and Charles have a combined income of $100,000 per year.
Both Sarah and Charles plan to continue working. Create a budget for the first
year of the baby’s life.

2. Now, assume that either Sarah or Charles plans to quit work after the baby is
born. Their income is cut in half. Create a budget for the first year of the baby’s
life.

3. Create an investment portfolio that makes sense for Sarah and Charles. What
percentage of their savings would you allocate to each investment tool? Why?

4. What other guiding principles need to be determined in advance in order to ensure

that this mutual fund is successful?

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The Theory
In the book, Corporate Creativity, six elements of corporate creativity were outlined:
alignment, self-initiated activity, unofficial activity, serendipity, diverse stimuli, and
within-company communication (Robinson & Stern, 1997). From this list of six, I
believe that self-initiated activity can also be applied to personal creativity. According to
Robinson and Stern, “humans have a natural drive to explore and create…It is this that
leads them to want to initiate creative activity on their own” (1997).

In the example above, the idea of a new mutual fund created by Sarah and Charles came
about as a result of self-initiated activity (Robinson & Stern, 1997). No person or
company told them that they must come up with the idea for a new mutual fund. Rather,
as a result of their personal life situation and discussions between the two of them, an
idea was created that filled a need in their life.

Reference

Robinson, A. & Stern, S. (1997). Corporate creativity: How innovation and

improvement actually happen.San Francisco: Berrett-Koehler Publishers.