Chapter 13 Flashcards
Marketability
The easiness to concert an investment into cash
Equity mutual funds
Funds that sell units or shares to j divisors and use this money to invest in STOCKS
Bond mutual funds
Funds that sell units or shares to individuals and use this money too invest in BONDS
balanced mutual funds
Funds that sell units or shares to individuals and use this money too invest in a combination of STOCKS and BONDS
Money market mutual funds
Funds that sell units or shares to individuals and use this money too invest in cash and investments that can turn in to cash quickly
Advantages in investing in mutual funds
- diversification
- professional management
- simple record keeping
- easy access, all financial advisors are licensed to sell
Disadvantages of mutual funds
- management fees vary a lot in price
- no control over investments bc the advisor manages them
- managers could diversify too much and end up with shitty investments
- other than money markets, liquidity can be low
How is a mutual funds value determined?
Net asset value - market value of mutual fund, minus liability fees
What are open ended mutual funds?
The share sells directly to the investor and will redeem shares when investor wants to cash them in
What are close ended funds?
Issued shares to investors when funds are created, but cannot redeem shares. These are traded on the stock exchange
Open ended mutual funds can be either no load or load funds, what does this mean?
No load means shares are sold directly to investors and do. Or charge a fee. Load funds charge a fee.
What does the management expense ratio measure?
The annual expenses incurred by a fund on a percentage basis
Higher the ratio, lower the return
What are the three types of mutual funds?
Money market, equity, and bond mutual funds.
What is a pooled investment fund?
Is an investment vehicle that pools money from investors and invests that money in a variety of stocks, bonds, or indexes of stocks and or bonds. An individual investor would have a limited resource to do this by themselves
What are the fund facts given with a mutual fund?
Filing date Quick facts What does the fund invest in How risky is it How has it performed Who is the fund for A word about tax What if I change my mind How much does it cost?
