Collective Instruments

Question 1

What are collective investments?

Answer 1

‘Pooled investments’ use funds provided by a large number of investors to invest in a wide range of investments

Question 2

What is an actively managed fund?

Answer 2

A collective investment where a fund manager makes the investment choices

Question 3

What are tracker funds?

Answer 3

Funds whose composition is dictated by the index they seek to track eg tracking the FTSE 100 share index

Question 4

What is active management?

Answer 4

Higher fees and expenses, try to beat the market or segment thereof

Question 5

What is passive management?

Answer 5

Lower fees and expenses, try to replicate the market or segment thereof

Question 6

What is an advantage of regular savings?

Answer 6

Pound cost averaging eg capital invested in small amounts on a regular basis can even out the impact of market fluctuations

Question 7

What are open-ended funds?

Answer 7

In a unit trust the investor buys units

Question 8

What are closed-end funds?

Answer 8

In an investment trust company, the investor buys shares via the stock market - the IT company exists to buy a portfolio of shares in other companies

Question 9

What are exchange traded funds (ETFs)?

Answer 9

A low cost means of investing in particular market or segment

Question 10

What is passive investment?

Answer 10

Designed to mimic the market or segment performance