Chapter 13: Investing in Mutual Funds, ETFs, and Real Estate Flashcards
financial service organization that receives money from its shareholders and invests those funds on their behalf in a diversified portfolio of securities.
mutual fund
who manages security selection and the portfolio under a mutual fund?
professional money managers
investment company whose shares trade on stock exchanges.
exchange traded fund (ETF)
when individuals pool resources for collective benefits of all contributors, this is referred to as…
pooled diversification.
- diversification
- professional management
- financial returns
- convenience
These are objectives of what type of investment?
mutual funds
- management company
- investment advisor
- distributor
- custodian
- transfer agent
These are the 5 different roles needed for m…
utual funds.
is an open-end or closed-end investment company:
- sell unlimited number of shares
- investors buy and sell shares from same mutual fund
- price fund at current value of all securities in portfolio
open-end investment company
(total market value of all securities in fund - liabilities) / shares outstanding =
net asset value (NAV)
is an open-end or closed-end investment company:
- operate w/ fixed number of shares outstanding and rarely issues new shares.
- trading is done in an open market
- no stock redemptions
- trades occur at a discount or premium to their NAV
- more pressure on managers
closed-end investment company
fund set up to match performance of a certain market segment.
index fund
ETFs are traded on listed exchanges, provide shares on an investor demand basis, sales occur at the end of the day, low costs/ portfolio turnover/taxes, and it’s best for narrow, targeted investing.
true
commission when shares of open-end mutual funds are purchased.
load funds
low-load mutual funds have 2-3% commission.
true
load fund that charges as much as 7 1/4% of value of shares sold.
back-end load mutual funds
no charge to buy funds.
no-load funds
help no-load funds cover distribution/marketing expenses
12b-1 fees (hidden loads)
cost incurred to hire professional money managers to run the fund’s portfolio of investments.
management fees
redemption fees and back-end loads are indicated by…
“r”
12b-1 fees are indicated by…
“p”
redemption and 12b-1 fees are indicated by..
“t”
- shareholder transaction costs
- annual operating expenses
- total cost over time
These are included in the what for mutual funds?
fee tables
invests in common stock w/ above-average growth potential
growth funds
higly speculative investments that seeks large profits from capital gains.
aggressive growth funds
invest in stocks that are undervalued by the market.
value funds
emphasize current income and invest in high-yielding common stock; low risk.
equity-income funds
balanced portfolio of stocks and bonds to generate well-balanced income and capital gains; 30-40% bonds.
balanced funds
balanced funds that automatically change asset allocation from more to less equity exposure as investor ages.
life-cycle (target-date) funds
seeks balanced return made of current income and long-0term gains, but more emphasis on capital gains.
growth-and-income funds
invest in various kinds of fixed-income securities; income = main focus.
bond funds
portfolio of short-term money market instruments.
money market mutual funds
portfolio of stocks/bonds equivalent to those in a market index.
index funds