Investment Funds Flashcards
Investment funds
pools of money from groups of investors invested in a variety of different stocks and bonds that make up each fund.
An investment fund is a supply of capital belonging to numerous investors used to collectively purchase securities while each investor retains ownership and control of his own shares.
An investment fund provides a broader selection of investment opportunities, greater management expertise, and lower investment fees than investors might be able to obtain on their own.
Types of investment funds include mutual funds, exchange-traded funds, money market funds, and hedge funds.
Mutual Funds
Mutual funds are baskets of stocks or bonds. They come in all different shapes and sizes, from covering broad stock market indexes to focusing on specific sectors. Typically managed by a funds manager associated with a brokerage firm.
A mutual fund is a type of financial vehicle made up of a pool of money collected from many investors to invest in securities like stocks, bonds, money market instruments, and other assets.
Mutual funds are operated by professional money managers, who allocate the fund’s assets and attempt to produce capital gains or income for the fund’s investors. A mutual fund’s portfolio is structured and maintained to match the investment objectives stated in its prospectus.
Mutual Funds Manager
Their job is to make decisions for the fund and set the fund objective. With a main goal of making money for the funds investor.
Index Funds:
An index fund is a portfolio of stocks or bonds designed to mimic the composition and performance of a financial market index.
Index funds have lower expenses and fees than actively managed funds.
Index funds follow a passive investment strategy.
Index funds seek to match the risk and return of the market, on the theory that in the long-term, the market will outperform any single investment.
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An index fund is a type of mutual fund or exchange-traded fund (ETF) with a portfolio constructed to match or track the components of a financial market index, such as the Standard & Poor’s 500 Index (S&P 500). An index mutual fund is said to provide broad market exposure, low operating expenses, and low portfolio turnover. These funds follow their benchmark index regardless of the state of the markets.
Total market index fund
invests your money in equal ratios across the entire stock market based on a total market index like the Wilshire 5000
total stock market index fund is a mutual fund or exchange-traded fund (ETF) that tracks an equity index such as the Russell 3000 Index, the S&P 500, or the Wilshire 5000 Total Market Index, as its benchmark. By investing in stocks linked to a given index, a total market index fund’s performance aims to mirror that of the index in question.
Bond Fund
A bond fund, also referred to as a debt fund, invests primarily in bonds (government, corporate, municipal, convertible) and other debt instruments, like mortgage-backed securities (MBS), with the primary goal of generating monthly income for investors.
Bond funds provide instant diversification for investors for a low required minimum investment.
Due to the inverse relationship between interest rates and bond prices, a long-term bond has greater interest rate risk than a short-term bond.
Exchange rated funds etfs
An exchange traded fund (ETF) is a basket of securities that trade on an exchange, just like a stock.
ETF share prices fluctuate all day as the ETF is bought and sold; this is different from mutual funds that only trade once a day after the market closes.2
ETFs can contain all types of investments including stocks, commodities, or bonds; some offer U.S. only holdings, while others are international.
ETFs offer low expense ratios and fewer broker commissions than buying the stocks individually.
work similarly to index funds, usually passively managed, set up to mimic a particular index,
unlike index funds and mutual funds that traded at the end of the day at the markets closing price. They are traded like individual stocks, they can be actively traded, throughout the day at whatever the current market price is.
For experienced this can be advantageous to take advantage of the price changes throughout the day. Potential of high short term gains, high risk involved, lower expense ratios. Brokerage may charge fees, some are doing away with
REITS
Real estate investment trusts, companies that invest in real estates. Invest in income producing real estate across different sector like, shopping malls, retail spaces, hotels, industrial, resorts, technology and data centers, hospitals, storage facilities, farms…
Way to invest in real estate without having to physically purchase property or deal with property management. I
Investors can earn a share of income made from the real estate investments in the form of dividends.
Real estate investment trusts (REITs) are companies that own and operate real estate to produce and generate income.
Investors can purchase shares in REITs—which represent ownership of an individual real estate company—just like regular stocks.
The individual performance of REITs can vary widely.
Many REITs are traded on major stock exchanges, but there are also a number of private and non-publicly traded REITs.
ETFS, index funds , are almost always cheaper and
ETFS, index funds , are almost always cheaper and more tax efficient than managed mutual funds. Recommend index and etfs, depending on investment goals.
Vanguard total stock market index fund= vtsax
highly diversified and provides investors exposure across the entire us stock market over 3500 stocks. Expenses, 0.04 percent, 4 dollars for ever 10,000 invested in 2019. Average return since 2001 7.17 per as of 2019.
Vanguard 500 index fund: =vfiax,
invests in stocks in the s&p 500 index100 index a large cap index it represents 500 of the largest U.S. companies and is considered a good gauge of overall U.S. stock returns expenses are 0.04% that is $4 for every $10,000 invested as of 2019 its average annual return since inception in 2010 is 6.73 sent as of 2019.
Vanguard real estate index fund symbol VGSLX
this fund invests in real estate investment trusts reit’s companies that purchase office buildings hotels and other real estate property expenses are 0.12% that is $12.00 for every $10,000 invested as of 2019, its average annual return since inception in 2001 is 10.65% as of 2019
Fidelity 0 total market index fund symbol SCROX
this fund is highly diversified and provides investors exposure across the entire U.S. stock market. Expenses are 0% as a 2019, its average annual return since inception in 2018 is 11.05% As of 2019
Fidelity S&P 500 index fund symbol FXAIX
this fund invests in stocks S&P 500 index large cap expenses are 0.015% that is $1.15 for every $10,000 invested as of 2019 its average annual return since inception in 2018 is 10.50% as of 2019
Fidelity real estate index fund symbol FSRNX
this fund invests in a variety of reads across various real estate sectors expenses are 0.07% that is $7.00 for every $10,000 invested as of 2019 its average annual return since inception in 2018 is 9.93% as of 2019
Schwab total stock index market fund symbol SWTSX
this fund is highly diversified and provides investors exposure across the entire U.S. stock market expenses are 0.03% that is $3 for every $10,000 invested as of 2019 its average annual return since inception in 2011 is 6.97% as of 2019
Schwab S&P 500 index fund symbol SWPP X
this fund invests in stocks in the S&P 500 index large cap it represents 500 of the largest U.S. companies and is considered a good gauge of overall U.S. stock returns expenses are 0.02% that is $2.00 for every $10,000 invested as of 2019 its average annual return since inception in 1997 is 8.1% as of 2019
Before you decide to make an investment, here are five key things you should be looking for that will help you get a good sense of the level of risk associated with each investment and help you make good investing decisions based on your goals and comfort level
- the company or funds financial situation and plans
- the company or funds historical performance
- the company or fund’s main objectives and future projections are performance
- any associated expenses and or fees
- other considerations like the companies or funds leadership track records and media mentions.
- the company or funds financial situation and plans
the company or fund’s financial situation and plans any company that issues publicly traded stock is required to issue an annual report to its shareholders.
these reports include information on the company’s financial state such as its balance sheet details of its assets liabilities profits losses and available capital, it’s revenue and expenses, it’s short and long term objectives and plans for growth, its strategy for navigating competition, and more firms are also required to provide an annual report to their shareholders that discloses how the fund is being operated its main goals, and its financial state these annual reports are available publicly and can be found in the company or funds website or with a quick Google search.
The us Securities and Exchange Commission website sec.gov also allows you to access the annual report filings for pretty much any company that’s publicly available reviewing a company or funds annual reports.
- the company or funds historical performance
the company or funds historical local performance looking at historical trends can provide you with important information on how a stock or fund has performed year over year
essentially you want to make sure the investment is consistently performing well on average while taking historically economic climates into consideration
for example the 2008 stock market crash had a hard impact on almost all investments but some fared better than others.
- the company or fund’s main objectives and future projections are performance
the company are funds main objectives and future projections of performance.
As mentioned, annual reports are usually available in the company or funds website
some key things to lookout for when viewing an annual report in terms of future projections are what their plans for growth are
for example the new product’s expanding to new markets acquisitions how their plans will make them profitable how they’re managing competition.
- any associated expenses and or fees
expenses and fees, before you invest
it’s important to understand what fees are associated with the investment that’s because fees can eat into your overall returns especially if the fees are based on the percentage of your investment.
Vanguard index funds are some of the most popular in the investing world because of their low fees essentially mean more profits for you as an investor in today’s world with high competition among brokerages and new age investing avenues through robbo advisors and the like many brokerages are no longer charging certain fees on many of their investment offering.
- other considerations like the companies or funds leadership track records and media mentions.
other considerations for example leadership track records and media mentions. When you do your research it could also help to consider things like track records and media mentions looking at the track record of a company CEO or the track record of a mutual fund manager can provide you with additional insights a quick Google search or LinkedIn profile visit can tell you about their educational background an investment experience which is very important given that they are managing millions and even billions of dollars of other people’s hard earned money yours included you also want to keep an eye on what’s being mentioned in the news when it comes to the company or fund you are interested in and this could also provide you with valuable insights as you make your investment decisions.
Brokerage account fees
this fee type includes things like annual fees to maintain your accounts and subscriptions for premium account features
A brokerage fee is a fee charged by a broker to execute transactions or provide specialized services.
Brokerage fees are based on a percentage of the transaction, as a flat fee, or a hybrid of the two and vary according to the industry and type of broker.
The three main types of financial securities industry brokers that charge brokerage fees are full-service, discount, and online.
