Chapter 4 (Mutual Funds) Flashcards
Closed-End Fund
Shares may not be redeemed, but instead are traded at prices that can differ from net asset value.
Exchange-Traded Funds (ETFs)
Offshoots of mutual funds that allow investors to trade index portfolios.
Funds of funds
Mutual funds that primarily invest in shares of other mutual funds.
Hedge Fund
A private investment pool, open to wealthy or institutional investors, that is exempt from SEC regulation and can therefore pursue more speculative policies than mutual funds.
Investment Companies
Financial intermediaries that invest the funds of individual investors in securities or other assets.
Load
A sales commission charged on a mutual fund.
Net Asset Value (NAV)
Assets minus liabilities expressed on a per-share basis.
Open-End Fund
A fund that issues or redeems its shares at net asset value.
Soft Dollars
The value of research services that brokerage houses provide “free of charge” in exchange for the investment manager’s business.
Turnover
The ratio of the trading activity of a portfolio to the assets of the portfolio.
12b-1 Fees
Annual fees charged by a mutual fund to pay for marketing and distribution costs
Unit Investment Trust
Money pooled from many investors that is invested in a portfolio fixed for the life of the fund.
Characteristics of a Closed-End Fund. 5
- Sold on primary market
- Fixed Amount of Shares
- Traded on secondary market
- Usually sold through brokers
- Premium/Discount of NAV
Characteristics of an Open-End Fund. 3
- Shares are bought directly from fund
- Redeem shares (@ NAV) from fund
- Pays redemption’s from cash
What are some of the Open-End Costs
- Fees from sales are called loads
- 12b-1 fees- marketing and distribution costs
- Management fees
- Operating expenses - record keeping, etc.