| Course | MAT 245 Personal Finance |
|---|---|
| Module | Module 7 |
| Paper type | Investment plan |
| Length | About 1,064 words, 6 pages |
| Format | APA 7 student paper |
| School | Aspen University |
| Program | Business Administration |
| Updated | October 2026 |
Free sample paper for MAT 245 Module 7
Forty Years, Two Fees: An Investment Plan That Keeps a Young Saver From Paying for Activity
Student Name
Business Administration Program, Aspen University
MAT 245: Personal Finance
Instructor Name
Month Day, Year
Forty Years, Two Fees: An Investment Plan That Keeps a Young Saver From Paying for Activity
Taylor Monroe now contributes enough to receive the full 401(k) match, a decision made in Module 1. The money, though, sits in whatever fund the plan placed it in by default, and the $6,000 from Taylor's previous job is still in that employer's plan, charging a yearly account fee. A coworker recommends a technology fund that rose 40% last year, and a relative says the market is a casino. This paper writes an investment plan for Taylor's retirement account. It is a teaching example using an invented person and plan menu, not investment advice.
Goal, Horizon and Tolerance for Risk
The account has one purpose, retirement, which for Taylor is about forty years away. Money that will not be touched for decades can ride out several market declines, so the horizon supports holding mostly stocks. Tolerance for risk is a separate question: whether Taylor would sell in a panic during a fall. Asked how it would feel to see the account drop from $8,000 to $5,000 in a year, Taylor said it would be unpleasant but tolerable, and that the money was not needed. Because Taylor's emergency fund and house fund are kept in cash elsewhere, a market fall would not force a sale.
Consolidating the Accounts
Moving the $6,000 from the old employer's plan into the current plan places all retirement money in one account with one allocation and removes the old plan's $60 yearly fee. A direct rollover between plans avoids taxes and penalties. The combined balance is about $8,000, and contributions of $2,720 from Taylor and $2,720 from the employer add $5,440 a year.
Why Activity Costs Money
Barber and Odean (2000) studied the accounts of more than 66,000 households at a large discount brokerage from 1991 to 1996. The average household turned over about three quarters of its stock portfolio each year and earned less than the market after costs. The fifth of households that traded most earned 11.4% a year, while the market returned 17.9%. The authors attributed the heavy trading to overconfidence: investors believed their information was better than it was, and the costs of acting on it consumed their returns. A coworker's hot fund invites the same behavior, since chasing last year's winner means buying after the gain.
French (2008) added up the fees, expenses and trading costs American investors paid to invest in the stock market from 1980 to 2006 and compared them with the cost of holding the market passively. He found that investors as a group spent about 0.67% of the market's value each year searching for better returns, and that the typical investor would have raised average yearly returns by about that much by switching to a passive market portfolio. Since all investors together hold the market, the extra spending on activity mostly transfers money to those who provide it.
The Fee Comparison
The plan menu offers index target-date funds at 0.12% a year and actively managed stock funds averaging 0.85%. The table projects the account over forty years, assuming a 7% yearly return before fees and contributions held at $5,440 a year.
The comparison is generous to the active fund, because it assumes that fund earns the market return before fees. French's estimate suggests that, for investors as a group, it would not.
| Fund type | Yearly fee | Return after fees | Starting $8,000 grows to | Contributions grow to | Total after forty years |
|---|---|---|---|---|---|
| Index target-date fund | 0.12% | 6.88% | 114,500 | 1,053,000 | about 1,167,500 |
| Actively managed stock fund, same gross return | 0.85% | 6.15% | 87,100 | 874,400 | about 961,500 |
| Difference | 0.73% | about 206,000 |
The Trap of a Long Menu
Benartzi and Thaler (2001) studied how participants in defined contribution plans divide their money. Many followed a simple rule of spreading contributions evenly across the funds offered, so the share they placed in stocks depended on how many stock funds happened to be on the menu. In experiments and in plan data, the same people chose very different allocations when the menu changed, a sign that the allocation was produced by the menu rather than chosen. Taylor's plan lists fourteen funds; putting 1/14 in each would produce a mix of overlapping stock funds, a bond fund, a money market fund and two target-date funds holding their own mixes, an allocation no one designed.
The Allocation and the Fund
Taylor will place the whole account in the 2065 target-date index fund. It currently holds about 90% stocks, spread across American and international companies, and 10% bonds, and it shifts gradually toward bonds as 2065 approaches, rebalancing on its own. One fund gives Taylor a diversified, low-cost allocation that fits the horizon and removes the temptation to adjust it. The fund could fall by a third or more in a severe year; the plan accepts that because the money will not be needed for decades and contributions made during a fall buy shares at lower prices.
Beyond the 401(k)
Once the emergency fund reaches three months of expenses, Taylor will open a Roth IRA and contribute what the budget allows, invested in the same kind of broad, low-cost index fund. Roth contributions are made with after-tax money, but qualified withdrawals in retirement are tax-free, which suits a young worker likely to be in a higher bracket later. The house fund stays in cash, because money needed within five years should not depend on the stock market.
Taylor's Investment Policy
| Rule | What Taylor will do |
|---|---|
| Contributions | Contribute at least enough for the full match, raise the rate by one point with each raise |
| Fund choice | One target-date index fund; no single-sector or last-year's-winner funds |
| Checking the account | Once a quarter, not daily; the app is removed from the phone's home screen |
| When markets fall 20% or more | Do nothing except keep contributing; reread this policy |
| When to change the plan | Only after a life change, such as marriage, a home purchase or a new job |
Conclusion
Over forty years, the biggest decisions in Taylor's investing are how much is saved, what the funds cost and whether Taylor stays invested during declines. Barber and Odean show the price of trading, French the price of active management for investors as a whole, and Benartzi and Thaler the risk of letting a fund menu choose the allocation. A single low-cost target-date fund and a written policy address all three.
References
Barber, B. M., & Odean, T. (2000). Trading is hazardous to your wealth: The common stock investment performance of individual investors. The Journal of Finance, 55(2), 773-806. https://doi.org/10.1111/0022-1082.00226
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
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 MAT 245 Module 7 instructions ask for
Investing is the theme of MAT 245's seventh module, and the paper commonly calls for an investment plan for a particular person and account. Whatever your classroom prompt for Module 7 specifies comes first; Taylor and the fund menu were invented. Describe the investor's goals, time horizon and tolerance for risk. Choose an allocation between stocks and bonds and explain it. Pick specific funds and compare their costs over the full horizon. Use research to explain common investor mistakes and how the plan avoids them. Set rules for contributions, rebalancing and what to do in a market fall, and cite sources in APA 7 form.
How this MAT 245 Module 7 example is built
About $8,000 sits in Taylor's retirement savings after moving $6,000 from the previous employer's plan, contributes 4% of a $68,000 salary and receives a 4% match, for $5,440 a year. The plan menu has fourteen funds, including index target-date funds charging 0.12% a year and actively managed stock funds charging 0.85%. The Journal of Finance articles by Barber and Odean and by French, and the American Economic Review article by Benartzi and Thaler, explain the costs of trading, of active management and of naive fund picking. A fee table projects the account over forty years at a 7% yearly return before fees: about $1.17 million in the index fund and about $960,000 in the active fund, a difference near $200,000 from fees alone. The plan chooses a single 2065 target-date fund, sets an automatic rebalance and writes four rules for falling markets.
Reading the MAT 245 Module 7 grading rubric
An investment paper earns credit when the allocation follows from the person's horizon and tolerance for risk and the fund choice is justified with numbers. This example states Taylor's forty-year horizon first and lets it drive a stock-heavy allocation, then shows the cost of the alternatives in dollars rather than percentages, which is the point students most often miss. Barber and Odean and French support the case for low-cost, low-activity investing with evidence rather than opinion, and Benartzi and Thaler explain why picking a little of everything on a menu is not diversification. The written policy shows the writer expects the hard part of investing to be behavior during a fall, and gives Taylor rules in advance.
Common MAT 245 Module 7 mistakes, and how to avoid them
Weak investment papers recommend funds without saying what they cost, or describe fees as small percentages that seem not to matter. Turn the fee into dollars at the end of the horizon. Another frequent error is choosing an allocation without stating the time horizon and how much loss the person could tolerate without selling. Avoid spreading money across every fund on the menu, which can create an allocation nobody chose. Explain risk in plain terms, including how far the portfolio could fall in a bad year. Write down what the investor will do when markets drop, because the plan that survives a crash beats a better plan that is abandoned.
Write yours, or have the desk draft it
This paper is an original model document written by our desk, not a submitted student paper and not an official Aspen University document. Read it for the moves, then write your own to the instructions in your classroom. If you want one built to your exact prompt and rubric, the first custom sample is free and arrives in 24 to 48 hours.
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MAT 245 Module 7 questions, answered
What does MAT 245 Module 7 usually ask for?
Aspen's MAT 245 covers investing in this module, so an investment plan with an allocation, fund choices and a cost comparison is typical. The prompt in your classroom has the final word.
Do people who trade often earn more?
No. Barber and Odean found that the households that traded most at a discount broker earned 11.4% a year net while the market returned 17.9%.
How much do fund fees matter over a career?
A great deal. In this example, a fee difference of 0.73% a year leaves the saver about $200,000 poorer after forty years.
Where can I find a free MAT 245 Module 7 sample paper?
Read this page: it carries a complete investment plan for a young worker's 401(k), with a forty-year fee table and written rules for market falls.
What is a target-date fund?
One fund built around a retirement year; it owns both stocks and bonds, moves gradually toward bonds as that year nears and rebalances without any action from the investor.