Chapter 6 Flashcards
Find objective we’re fund managers six dogs of established large cap companies that are thought to be undervalued in price
Value objective
Objective fund that have growth as their objective invest in a portfolio of stocks that seek capital appreciation as the primary goal. Typically invest in common stock.
Growth objective
Find objective that have income has their objective or conservative finds out invest in fixed-income securities. Seek to provide investors with a stream of income.
Income objective
Fund objective that is usually the most conservative type of fund. It is designed for investors who only concern is to not lose money.
Capital preservation objective
Large cap company market capitalization amount
10 billion or more
A company that has a market capitalization from 2 billion up to 10 billion
Mid-cap company
A small cap company has market capitalization of how much?
300 million up to 2 billion
A micro cab company has market capitalization of how much
Less than 300 million
A growth fund is typically invested in what
Common stock
This type of fund invests in large cap companies with strong product lines robust financial positions and a long history of dividends.
Blue chip funds
These funds seek capital appreciation with the objective to achieve rapid growth in the shortest time period possible. Typically purchase by younger investors with the financial resources and risk tolerance to handle volatility with this type of investment.
Aggressive growth fund
An equity fund that combines the investing styles of value stock and growth stock
Blended funds
Stock based mutual fund that pays consistent dividends. Invested with common and preferred stock.
Equity income fund
Type of mutual fund that focused on investing in specific concentrated groups of securities in a particular industry such as utilities electronics financial services and healthcare.
Sector funds
What type of fund looking to make investments in companies that are undergoing a major change or that have a specific event coming up that could dramatically affect their fortune. A company may be considering a murderer or acquisition or have pending lawsuit that is about to be settled
Special situation fund
Funds that purchase common stock. Once the stocks are purchased and owned the fund manager will write a call option against the portfolio. Covered call writing strategy designed to increase income pay out to investors
Option income fund
A mutual fund can own what type of securities?
Any security that is consistent with the funds stated objectives
Type of fund for investors seeking capital preservation and or liquidity
Money market fund
True or false:Hybrid funds Provide a combination of asset classes including stocks bonds money market instruments and cash
True
To accomplish this portfolio portfolio managers invested large-cap stocks such as blue chip stocks or utility stocks. They also invested portion of the portfolio and preferred stock to increase the potential for dividend payout and increased income
Growth and income funds
Target date funds are sometimes referred to as what?
Life cycle funds
And this type of fund six to maintain a ratio of stocks to bonds that reflect a more conservative investment style for investors who are willing to except a moderate level of risk the principal while obtaining income and capital appreciation.
Balanced fund
Types of funds that invest in non-US stock or bonds throughout the world.
International funds
Will invest in foreign and domestic stock in order to take advantage of which ever market is performing well at a specific time
Global funds
Funds that have portfolios made up of stocks or bonds from issuers located in a specific area. Carry significant risk as they are exposed to risks that may affect an entire geographic areas such as earthquake or hurricane
Country/regional funds ( geographic)
Invest in mining companies that produce gold silver platinum or other precious metals but can also invest in commodities themselves. Appropriate for an investor who wishes to protect against inflation
Precious metal funds
That’s fun intends to mirror as closely as possible the movement of a specific index. Appropriate for an investor who is skeptical that portfolio managers consistently can meet or exceed the performance of the overall market
Index funds
What is considered a passive investment strategy?
An index fund
The practice of placing orders to buy already mutual fund shares after the NAV is calculated after the close of the NYSE the receiving the price of the previously calculated and 80 determined for that day
Late trading
Redemptions of mutual funds received the next calculated in a be. Buyers pay the next calculated POP.
Forward pricing
The charge of a mutual fund that is the primary compensation paid to the underwriter and broker dealer for marketing advertising and selling funds chairs to the public
Sales charge
POP formula
NAV + SC = POP
Sales charge formula
POP-NAV=SC
Sales charge percentage formula Calculating the sales charge percentage when the NAV and POP are given
(Pop-nav) / pop= sales charge %
Calculating POP when the NAV and sales charge percentage are given
POP = NAV / (100%-SC%)
Calculating the NAV when the POP and sales charge percentage are given
POP$ x sales charge %= sales charge $
POP $ - sales charge $= NAV $
A mutual funds POP cannot exceed the NAV by more than what percent ?
8.5%
12 B-1 distribution fee Includes:
Marketing advertising and other cost of distributing find shares advertising includes the printing and mailing a perspective and sales literature to new investors but not existing investors
Who can approve 12 B-1 fee changes ?
A majority of outstanding shares
Class B shares are also referred to as
Contingent deferred sales charge (CDSC)
Maximum 12 B1B or a no load fund
.25%
If a fund is advertised as pure no load fund what is the max sales charge?
0 it can not have any form of sales charge or 12b1 fee
An investment strategy in which the investor purchases a fixed dollar amount of a mutual fund on a regular basis without concern for the share price
Dollar cost averaging
If he redemption of mutual fund occurs within seven days of purchase the broker dealer or representative must do what?
Return at the selling concession to the fund underwriter
Withdrawal plan that involves sending a check out each month for a designated amount
Fixed dollar amount
Withdraw plan that involves liquidating the same number of shares each month and sending the customer the proceeds the prices will most likely fluctuate
Fixed share amount
Withdrawal plan that involves liquidating a fixed percentage of the customers portfolio. The amount of his check May vary.
Fixed percentage
Withdrawal plan that the investor instructs the fund to systematically liquidate all holdings with any specified time. Example 5 years.
Fixed time period
A fee usually charged by the fund to discourage short term traders biases in the field clients who have not held their shares for some minimum designated time.
Redemption fee
The practice of purchasing or redeeming mutual funds to profit from differences between the daily closing NAV and the next days and events that occur between calculations
Mutual fund market timing
A fund company must transmit redemption proceeds to the investor within how many days of request?
Seven calendar days
Provision that allows mutual funds to make it easier for people to replace money that they have a previously withdrawn.
Reinstatement provision
How long is the typical reinstatement provision?
30 days
How long is considered short term in regards to a capital gain event
12 months or less
How long is considered a long-term capital gain
12 months and one day
What rate short-term gains taxed at?
Ordinary Income rates
What rates are long-term capital gain taxed at ?
Preferential mean usually 15%
Event for a mutual fund investor occurs when the investor redeems fund shares for less than a cost basis
Capital loss event
What form must a taxpayer used to report mutual fund distributions?
1040 or 1040A
Includes the total purchase price of the investment if purchased with after tax dollars.
Cost basis
What happens when an investor automatically and reimburse its dividends and capital gains in the investment company?
The number of outstanding shares in both the management company and the investors own shares will increase
When the investor reinvest dividends back into the fund or takes out in cash when are the distributions taxable?
Taxable in the year received
Average cost per share formula
Total dollars invested divided by total numbers of shares held
Determines the cost basis by identifying First shares purchased as the first shares redeemed.
FIFO (first in first out)
Maximum shelf life for a prospectus
16 months
An abridged form of the statutory prospectus provides the essential information investor would need to decide to buy. Includes an application and is an offer to sell . is known as:
Summary prospectus
Permits the publication containing a summary of information found in a prospectus for a mutual fund. Must contain the funds goals investment strategies rest of the fund and a toll-free number so investors can call to obtain the prospectus
Omitting prospectus
Annual report that explains the auditors finding another their opinion is qualified or nonqualified
Auditors disclosure document
States that the auditor agrees with the company’s financial information
Nonqualified opinion
The auditor disagrees with some or all of the company’s financial reporting
Qualified opinion
Contain supplementary information on many of the items found in the perspective such as fund holdings transactions and fees. No requirement for periodic mailing must be furnished upon request
A statement of additional information
A prohibited practice suggesting a find is guaranteed or approved by the US government or that a find invest in certain securities or industries
Misstatement of fund name a.k.a. names rule
A prohibited practice suggesting that the fund focuses its investments in a particular country or geographic region is not allowed
Geographical focus funds
Prohibited practice stating that funds are federally exempt. Must have at least 80% of its investments and tax exempt vehicles
Tax exempt funds
Hey mutual fund must invest at least one percent of the value of its assets and investment based on the name of the fund.
80%
