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  1. Benefits of Mutual Funds
    • -diversification
    • -Professional Management
    • -Minimum Initial Investment
  2. drawbacks of mutual funds
    • -risk
    • -costs
    • taxes on cap gains, dividends and profits from selling them
  3. difference between open end fund and closed end fund
    • open end- they buy back your funds, will sell new funds,
    • closed end- you can only purchase or sell by going through another investor
  4. Net asset Value
    • The value of assets- liabilities held by a mutual fund divided by the number shares outstanding
    • -changes everyday
  5. Taxation of investment companies
    • •A “regulated investment company” does not have to pay taxes on
    • its investment income.
    • •To qualify, an investment company must:
    • –Hold almost all its assets as investments in stocks, bonds, and other securities
    • –Use no more than 5% of its assets when acquiring a particular security
    • –Pass through all realized investment income to fund shareholders
  6. Types of expenses and fees
    • 1. sales charge
    • 2. 12b-1 fees
    • 3. management fees
    • 4. trading costs
  7. sales charge "load"
    –Front-end loads are charges levied on purchases.

    –Back-end loads are charges levied on redemptions.
  8. 12b-1
    allows funds to spend up to 1% of fund assets annually to cover distribution and marketing costs.
  9. Management Fees
    • –Usually range from 0.25% to 1.00% of the funds total assets
    • each year.

    –Are usually based on fund size and/or performance.
  10. Trading costs
    –Not reported directly

    • –Funds must report "turnover," which is related to
    • the amount of trading.
    • –The higher
    • the turnover, the more trading has occurred in the fund.
    • –The more trading, the higher the trading costs.
  11. money market mutual funds
    • •Money market mutual funds (MMMFs) are mutual funds specializing in money market instruments.
    • –MMMFs maintain a $1.00 net asset value to make them resemble bank accounts.
    • high quality, super short term, maturities less than 90 days
    • –There is no guarantee that the net asset value will be $1.00 or more.
    • •A Net Asset Value for a MMMF under $1.00 results in the term, “breaking the buck.”
    • •Following the Crash of 2008, a few MMMF “broke the buck.”
    • –Depending on the type of securities purchased, MMMFs can be either taxable or tax-exempt.
  12. Long term funds
    • stock funds
    • taxable and muni bond funds
    • stocks and bond funds
  13. stock funds
    • •Some stock funds trade off capital
    • appreciation and dividend income.
    • –Capital appreciation
    • –Growth
    • –Growth and Income
    • –Equity income

    • •Some stock funds focus on companies in a
    • particular size range.
    • –Small company
    • –Mid-cap
    • –Large-cap

    • •Some stock fund invest internationally.
    • –Global
    • –International
    • –Region
    • –Country
    • –Emerging markets
    • •Sector funds specialize in specific sectors of
    • the economy, such as:
    • –Biotechnology
    • –Internet
    • –Energy
    • •Other fund types include:
    • –Index funds
    • –Social conscience, or “green,” funds
    • –“Sin” funds (i.e., tobacco, liquor, gaming)
    • –Tax-managed funds
  14. Bond Funds
    • •Bond
    • funds may be distinguished by their
    • –Maturity range
    • –Credit quality
    • –Taxability
    • –Bond type
    • –Issuing country

    • •Bond
    • fund types include:
    • –Short-term and intermediate-term funds
    • –General funds
    • –High-yield funds
    • –Mortgage funds
    • –World funds
    • –Insured funds
    • –Single-state municipal funds
Card Set:
2012-03-14 03:49:57

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