8. Collective investments Flashcards
4x main collective investments
Unit trusts
Investment trusts
Investment bonds
OEIC’S
4X benefits for Collecting Investments
- Diversification
- Reduced dealing costs
- Wide choice of funds
- Investment manager expertise
Unit trusts
A pooled investment , which is open ended
Accumulation units -reinvest income for growth
Distribution units- split off any income
Offer price
Price which investors buy units
The Bid Price
Price to buy back units from investors
Cancellation Price
Minimum permitted bid price
Bid offer spread
The difference between the price at which a unit is offered to an investor and the person buys back.
Contract Note
specifies the fund and the number of units .the unit price and the amount paid .
The unit certificate
this specifies the fund and the number of units held and is the proof of ownership of the units
3x How are units in a unit trust bought and sold?
- A stockbroker
- A financial advisor
- investment trust manager
Net asset value per share
Total value of the investment fund divided by the number of shares
Gearing
The level of debt as a percentage of a company equity . It is a way of measuring the extent to which a company operations are funded by borrowing rather than by shareholder capital
Split-capital investment trust *
Income shares = income and no growth
Capital shares= growth and no income
Real estate Investment trust
- No corp tax
- stamp duty reserve tax is charged at 0.5% on purchase
- No individual shareholder can own more then 10%
OEIC
Open ended Investment company
Split capital Investment
Income shares - whole income but no growth
Capital shares- No income but share capital Growth at end of term
An initial or buying charge
Added to the unit price and is normally in the region of 3 per cent to 5 per cent of value of individuals investment
Annual Management charges
based on the value of the fund- the range of annual management charges is typically between 0.5% and 1.5%
Dilution Levy
This may be added to the unit price on a sale of shares or deducted from the price on sale of shares in situations
Endowments
Investment based of life assurance
Friendly society plans
Mutual self help organisations
tax exempt savings
£270 a year tax free
Top Slicing
1.The gain on the policy
Surrender value+Withdrawals non taxed-original investment
2.Gain divided by the number of complete policy years
Non Main stream Pooled investments (NMPI)
A unit I an unregulated collective investment A unit qualified investor scheme A security issued by a vehicle A traded life policy rights or interest in any investment
Structured products
Offer protection up to 100%
Investment product
Higher returns higher risk
SCArPS
structured capital at risk
product that provides an income
Non Scarp
promises to provide a return of 100% invested
risks associated with structured products
- Counter-party risk
- Inflation
- Market
