Investment Vehicles Flashcards
Exchange traded products
examples include exchange traded funds and notes
Can ETF’s be sold short or bought on margin?
Can prices deviate from NAV
Yes
Yes
Do ETF dividends differ from mutual fund dividends?
The taxation of dividends received from holding ETF shares is comparable to the treatment of dividends received from holding mutual fund shares. Taxable dividends are treated based on holding period and subject to either ordinary income rates or long term capital gains (i.e., holding period largely determines whether the dividend is “qualified”
Exchange Traded Notes (ETNs)
ETNs are traded on a major exchange
•unsecured debt securities
•can be sold short or purchased on margin
•no coupon payments
•ETNs have a maturity date
•Taxation
–Typically, more efficient than mutual funds and ETFs
Net Asset Value
[(Market Value of Assets )-(Liabilities)] / (Shares Outstanding)
Closed-End Mutual Funds pricing to NAV
premium of discount on secondary market
Can closed-end funds raise new funds
No!
Mutual Fund fees
Four types:
- Operating expenses
- Front end load
- Back end load
- 12 b 1 charge
Mutual Fund Returns & Taxation
(NAV1 - NAV0 + Income and capital gain distributions)/NAV0
Mutual funds generate “internal” capital gains and dividend income that are taxable to the shareholders of its fund. These realized gains, within the fund, become recognized for tax purposes to the shareholder even when the mutual funds are not sold by the investor.
Less known REIT facts
Form of a UIT May be public or private Must distribute 90%+ of income Types: equity, mortgage, hybrid Income distributions to shareholders is not taxed to the REIT (tax liability is passed thru)
Master Limited Partnerships (MLPs)
- publicly traded limited partnership
* approximately 90% of cash flow must come from investments in real estate, commodities, or natural resources
Variable annuity withdrawal
- Withdrawals before age 59.5 incur 10% penalty
* Gains distributions are taxed as ordinary income
