Exam mock practise Flashcards
One way to invest in property is by purchasing shares in a listed property company
These companies hold and build many properties, generally all over the UK so by owning the shares you indirectly invest in property too.
Instead of this you can buy shares in a property unit trust or property investment trust. These invest in the property companies as mentioned above
What is the benefit of purchasing shares in a property company instead of directly purchasing a property?
What kind of investor are property unit trusts/investment trusts useful for?
Can a property unit trust or property investment trust be invested an ISA?
Why can property unit trusts generally not be held in an ISA?
What is the benefit of purchasing shares in a property company instead of directly purchasing a property? Increased diversification - you are investing in multiple properties instead of 1. (keep in mind investing that you are investing shares in one company tho
What kind of investor are property unit trusts/investment trusts useful for?
Those with lower resources (who cannot purchase shares in the property companies)
Can a property unit trust or property investment trust be invested an ISA?
Yes but only if the investor is able to retrieve their funds from the investment when they want
Why can property unit trusts generally not be held in an ISA?.
Many unit trusts build a clause into their rules stating that they have a right to restrict investors’ access to their money for a period of up to six months. This does not satisfy the ISA rule stated above
What are REITS?
Is stamp duty payable on the purchase of shares in a REIT?
When shares in a REIT are sold CGT is payable (subject to available CGT exemption) on the growth in share price, like normal shares.
Investment trusts set up as closed-ended companies listed on the stock market. It has a ring fenced element (property letting side. Non exempt because no corporation tax) and a non ring fenced element (corporation tax is payable, hence non ring fenced
When income is paid to the investor, it is in two parts, coming from each of the two elements:
Income from ring fenced part is paid to investors net of 20% income tax . Non tax payers can reclaim whereas higher and additional will have increased liability. This part has no allowance!
Income from non ring fenced part pays dividends as normal. Dividend allowance allowed
When shares in a REIT are sold CGT is payable like like normal shares.
What is a smoothed MTIP?
It is one of the 3 stakeholder products that can be held in an ISA wrapper, along with cash ISAs and S&S ISA’s
A smoothed MTIP is investments into with profit funds
What is total expense ratio of a fund?
It is the charges of a fund expressed as percentage of the fund size
Smaller funds (with lower Assets Under Management) are likely to have a higher expense ratio, especially when funds have fixed charges
What is the Holding Period Return Calc?
What is the Money Weighted Return Calc?
Gain/initial value
Gain (plus/minus monies withdrawn/invested - remember it is opposite!) / initial investment + additional money as a ratio of how long it has been invested)
What is quantitative tightening?
The process where central banks draw money out of the economy by selling bonds previously acquired under quantitative easing
What is standard deviation?
Measures how widely the return of investment performs around its average or expected return
What does the efficient frontier concept represent?
a SET of portfolios that offer the highest return for given level of risk
The register of unit holders in a unit trust can be closed for a max of how many days in one year?
30 days
What is ‘hurdle rate’?
BTC investment trust has a hurdle rate of 5%
BBC investment trust has a hurdle rate of -5%
The rate at which an investment trusts investments must grow in order to repay each share on wind up date (when the investment trust stops)
BTC investment trust has a hurdle rate of 5% - The investments must grow by 5% annually to repay all shares when the trust is wound up
BBC investment trust has a hurdle rate of -5% . The investments can fall by a max of 5% and still be able to repay all shares when the trust is wound up
Obviously, an investor will want the trust to have a negative hurdle rate
What is the difference between maturity dates between exchange traded notes and exchanges traded funds
ETNs have a maturity date
ETNs track currency
ETN’s are only synthetic (because they partially use loan stock to track the currency (also why there is a maturity date)
ETF’s have no maturity
ETF’s track indices
ETFs can be fully replicating or synthetic
Other than that they are very similar in that they can be traded on stock markets, can be traded
SAYE is what
If you wanted to invest into an ISA using the SAYE or share scheme how long do you have from when you receive the money?
Save as you earn scheme (Like TSB’s share scheme/incentive scheme )
You get 90days to invest into an ISA from when receiving the money for it to be classed as an eligible ISA investment
What is the difference between Over The Counter (OTC) & Exchange Traded derivatives?
Derivatives are either bought exchange traded or over the counter
exchange traded = Bought from a stock exchange. Not bespoke. Has standard T&C’s
OTC = bought bespoke from a bank or issuer by a specific client (like in the movie ‘a big short’ when murray went into the bank directly). This obvs means it will have unique T&C’s
What is a covered call option?
What uncovered call option?
Where the call option is for an asset that the seller does own
Where the call option is for an asset that the seller does NOT own (MUCH RISKIER)
SAME AS ABOVE APPLIES TO PUT OPTIONS TOO
When you switch funds in an onshore bond do you incur any tax charges?
No
This is a benefit of them. For OICS for instance, if you switch funds it is classed as a disposal for CGT purposes so you pay tax
