Chapter 18 Mutual Funds: Types and Features KT

Question 1

A withdrawal plan where the investor receives payments from the fund by redeeming a specified percentage of fund holdings each year.

Answer 1

ratio withdrawal plan

Question 2

A plan that enables set amounts to be withdrawn from a mutual fund or a segregated fund on a regular basis.

Answer 2

systematic withdrawal plans

Question 3

A method of fund valuation that weights each cash flow by the length of time it is held in the portfolio, assumes a constant rate of return through period.

Answer 3

Modified Dietz method

Question 4

A fund that invests in preferred shares as well as high-quality common shares, with a history of consistently paying dividends.

Answer 4

dividend funds

Question 5

Mutual funds that pursue a growth strategy in early years, holding more risky assets and gradually move towards less risky assets as the maturity date approaches.

Answer 5

target-date funds

Question 6

A group of managed products (particularly mutual funds) with a similar investment mandate.

Answer 6

peer group

Question 7

The type of form that identifies investment income sent by an unincorporated fund to the investor.

Answer 7

T3 form

Question 8

Withdrawal based on periods that are continually readjusted to the changing life expectancy of the plan holder and are designed to deplete the entire investment by the end of the plan.

Answer 8

life expectancy-adjusted withdrawal plan

Question 9

A fund manager does not replicate the market exactly but sticks fairly close to the market weightings by, for example, sector, country or the average market capitalization.

Answer 9

closet indexing

Question 10

A fund with similar objectives to those of balanced funds, but typically does not have to hold a specified minimum percentage of the fund in any class of investment.

Answer 10

asset allocation funds

Question 11

The deemed cost of an asset representing the sum of the total amount paid plus any additional costs, such as brokerage fees and commissions.

Answer 11

adjusted cost base

Question 12

A type of withdrawal plan where the fund holder chooses a specified dollar amount to be withdrawn on a monthly or quarterly basis.

Answer 12

fixed-dollar withdrawal plan

Question 13

A fund that sets out to match the performance of a broad market index, such as the S&P/TSX Composite Index.

Answer 13

index fund

Question 14

A fund that must invest a minimum of 90% of their non-cash assets in equity securities.

Answer 14

equity funds

Question 15

A fund that invests primarily in bonds and derives its income mostly from interest payments made by bond issuers to the fund.

Answer 15

bond funds

Question 16

A measure of return calculated by averaging the return for each subperiod in which a cash flow occurs into a return for a reporting period.

Answer 16

time-weighted rate of return

Question 17

A term that describes the changes in the target-date fund’s asset allocation mix over time.

Answer 17

glide path

Question 18

A fund that invests in both stocks and bonds to provide a balanced mix of income and capital growth.

Answer 18

balanced funds