Pooled Investments Flashcards
Mutual fund
Baskets of stocks, bonds and cash
Advantages of mutual fund:
Pooled with others, diversified, professional management,
Equity fund
Global, domestic, growth funds,
Fixed income funds
Bonds - can be tax free at both state and federal
Money market funds
Not guaranteed by FDIC
Types of funds
money market, fixed income, mortgage, growth, equity, index, specialty and real estate
Longer time horizon and risk tolerance may be better investing in
growth, equity, index, specialty and real estate funds
Shorter time horizon and lower risk tolerance
money market, fixed income (bond funds) and mortgage funds
Balanced
combine lower risk with higher risk tolerance- stocks and bonds
Are stocks and bonds correlated?
No
Hedge funds are suitable for
the super wealthy and investors must be accredited; net worth of 1M
Difference in a hedge fund from mutual fund?
Not regulated, hardly any restrictions on taxes (get a tax break on carried interest income), structured on flexibility so a higher return on investment; managers are paid only on performance
Explain partners of a hedge fund:
A general partner is the owner of the hedge fund who manages the funds. A limited partner is the company that holds the funds.
