Market Indicies

Question 1

Define “ Nasdaq”

Answer 1

• A global electronic marketplace for buying and selling securities
• It is a benchmark index for U.S. technology stocks.

Question 2

Define “Standard & Poor’s 500” Index

Answer 2

• A market-capitalization-weighted index of the 500 largest U.S. publicly traded companies by market value.
• The S&P 500 index is widely regarded as the best single gauge of large-cap U.S. equities.

Question 3

Describe the S & P 500 Capitalization Weighting Method

Answer 3

• The S&P 500 focuses on the U.S. market’s large-cap sector
• It is a float-weighted index, meaning company market capitalizations are adjusted by the number of shares available for public trading.
• It gives a higher percentage allocation to companies with the largest market capitalizations

Question 4

Describe “A Shares”

Answer 4

• A shares have what is called a “front-end load.”
• Front-end load means an investor invests a certain amount in a mutual fund, but a certain percentage of the initial investment is taken out as commission.
• Therefore, there will be less money invested in mutual fund shares than the initial payment amount.

Question 5

Describe “B Shares”

Answer 5

• B shares have a back-end load.
• This means that the entire initial investment amount is invested into mutual fund shares, but when the investor is ready to sell the shares, a certain percentage is deducted and paid to the mutual fund as commission.
• Therefore, the investor receives less than the total value of the investment when the shares are sold.

Question 6

Describe “C Shares” Part I

Answer 6

• The main aspect that differentiates C shares from A shares and B shares is that C shares are level-load.
• This means the full amount of money paid to the mutual fund is invested in shares.
• Commissions for level-load shares are paid to the mutual fund through annual fees. This level-load structure is unique to C shares.

Question 7

Describe “C Shares” Part II

Answer 7

• Class C shares often have lower expense ratios than class B shares.
• However, they have higher expense ratios than class A shares.
• Class C shares may be a good option for investors with a relatively short-term horizon, who plan to keep the mutual fund for just a few years.

Question 8

What is the ongoing fees of a C-Shares called?

Answer 8

The ongoing charges that constitute the C-share level load are officially known as 12b-1 fees.

Question 9

Do C-Shares carry back-end fees?

Answer 9

• Class C shares do not have front-end loads, but they often carry small back-end loads, officially known as a contingent deferred sales charge (CDSC), just as class B shares carry.
• However, these loads for C shares are much smaller, typically only around 1%, and they usually vanish once the investor has held the mutual fund for a year.

Question 10

Who should invest in C-Shares?

Answer 10

• Class C shares would work best for investors planning to keep the fund for a limited, intermediate period, optimally more than one year but less than three.
• That way, you hold on long enough to avoid the CDSC, but not so long that the high expense ratio will take a major toll on the fund’s overall return.