Chapter 1-Fund Investments Flashcards
Commodities …
Anything from the ground (oil), grows on the ground (corn), or feeds from the ground (cattle)
Small cap stock funds hold stocks with median market capitalization of __, medium cap stock funds hold stocks whose market capitalization median is __, large cap stock funds hold stocks whose median size is ____
$300 million to $2 billion (or an average of $7-7.8 billion if you believe the textbook/test); $2 billion to $10 billion (or $28 billion if you believe p. 7 of the textbook); $10+ billion (or $199 billion if you believe p. 7 of the textbook)
Standard deviation (SD)
Investments fall within one standard deviation of the mean 68% (appx 2/3 of time). Investments fall within 2 standard deviations of the mean about 95% of the time.
The smaller the SD the less volatile and less risky an asset is.
Risk-adjusted return basis
Return divided by standard deviation
Derivatives are derived from…
An equity or debt instrument
Morgan Stanley EAFE index
Mid and large cap foreign companies of 22 developED countries outside US and Canada.
Annual home ownership costs (excluding mortgage) are similar to
A variable annuity with total costs of about 3% per year.
S&P 500 is made up of
Large cap growth and large cap value stocks
Falling rates can be a double edged sword for bond investors because..
Less current income for investors BUT principal appreciation can be very high (long term gov bonds had total return of 17.8% in 2002-2/3 of that due to principal appreciation)
The long-term returns of commodities are ___
less than inflation despite being extremely volatile.
What is the CRB Index?
Commodity Research Bureau is a commodity price index that tracks the prices of 19 commodities
Since 1947, the inflation-adjusted price of the CRB index has declined __ annually, so a cumulative loss of about __ over the past 70+ years.
1% ; 50%
The CRB index is ___ between 19 different commodities.
equally weighted
What is the most popular investment in the U.S., as measured by a percentage of net worth?
real estate
https://www.richmondfed.org/publications/research/economic_brief/2023/eb_23-39
During the Civil War, a barrel of oil cost ___ in 2011 dollars.
$164.50
As of January 2024, the average large company GROWTH stock had a P/E ratio of __, a P/B ratio of __, and ___ yield.
The average large VALUE stock had a P/E of __, a P/B of __, and a __ yield.
37; 18; 1.4%
18; 2.6; 2%
Historically, a stock with a P/B ratio of __ is said to be cheap; a P/B of ___ is expensive.
<1; >5
In this course, referring to T-bills means ___ maturity.
1-month
Total return includes ___ and _____ minus ____
interest payments made by securities; principal appreciation; depreciation
A ____ would be the IBF’s top choice for portfolio diversification using a sector fund.
real estate fund
Growth of a $10K investment from 1972-2023.
REITs ->___
US small stocks -> ____
US large stocks -> ____
US EAFE stocks -> ____
Long-term bonds -> ____
Med-term bonds -> ____
30-day T-bills -> ____
Inflation -> ____
$2.39 million
$1.95 million
$1.61 million
$1.27 million
$270K
$221K
$93K
$76K
Since the 1950s, the 2 best-returning decades have been the 1950s ( ___ annualized) and the 1990s ( ___ annualized).
18.2%; 17.6%
September 2010 was the 3rd time cotton traded for > $1 a pound since ___.
the Civil War
There are approximately ___ publicly traded REITs in the U.S.
200+
