Term
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Definition
| These fund invest in common stocks of companies whoes shares they believe will grow faster than the average company. They are more volatile, but have a higher potential for long-term appreciation. |
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Term
| Conservative Growth Funds |
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Definition
| These funds invest in blue-chip stocks (securities of large, well-established companies that have a long history of paying dividends). |
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Term
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Definition
| These funds invest in small companies, often inital public offerings. The stocks are usually traded over-the-counter and are less liquid than the stocks of larger companies. They can be very volatile, but can produce high returns for long-term investors. |
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Term
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Definition
| "Bargain Hunters" of the stock world. They invest in stocks that are undervalued and look for stocks that have low P/E ratios, low book value ratios, and that pay higher than average dividends. Tend to invest in mature companies that pay a regular dividend. |
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Term
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Definition
| These funds invest in the common and preferred stock of companies that pay high dividends in relation to their market price. These are usually mature companies that have less potential for capital appreciation than growth companies but are also less likely to decline in value. |
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Term
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Definition
| These funds hve both capital appreciation and current income as their investment objectives. They invest in companies that are expected to show more growth than a typical income stock and higher dividends than most growth stocks, but they usually show less capital appreciation than pure growth funds and lower dividends than a pure income fund. |
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Term
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Definition
| These funds attempt to boost their returns by writing covered calls against the stock in their portfolios. The premiums received for writing the calls are used to increase dividends. These may not appreciate as much as regular stock funds. |
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Term
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Definition
| These funds tend to invest in large-cap stocks. |
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Term
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Definition
| These funds invest their assets in bonds. Their main objectives are current income along with preservation of capital. They are susceptible to the smae risks as direct investments in bonds - credit risk, call risk, reinvestment risk, and some interest-rate risk. |
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Term
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Definition
| These funds invest in bonds issued by a variety of corporations. Highly rated corporate bonds have more credit risk than government bonds, the yields are much higher. |
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Term
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Definition
| These funds invest in bonds rated belwo investmeent grade, known as junk bonds. They pay higher returns, but also have much more risk. |
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Term
| Mortgage-Backed Securites Funds |
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Definition
| These funds usually contain a morgage-backed pass-through securities issued by government agencies like Ginnie Mae or Fannie Mae. |
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Term
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Definition
| These funds purchase portfolios consisting of exclusively of municipal bonds. |
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Term
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Definition
| These funds invest in a group of stocks or bonds that largely mirro the composition of a particular index. The fund attempts to produce the smae return as the index. Tend to have lower fees, and have low turnover. |
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Term
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Definition
| Is the number of times the securities that make up the portfolio change. |
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Term
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Definition
| These funds maintain some proportion of their assets in bonds and preferred stock, and common stock. Tend to be less volatile than common stock funds. |
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Term
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Definition
| These funds resemle balanced funds in that they invest in different asset clasess - stocks, bonds, and money-market securities. Allos investors to diversify their assets in one fund. |
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Term
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Definition
| These funds resemble blend funds in that they invest in both stocks and bonds, or invest in a mixture of value and growth stocks, or try to find stocks that cannot be classified as either growth or value. |
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Term
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Definition
| These funds invest in money-market instruments, common stocks, and bonds. Unlike balanced funds, the % of the portfolio invested in any of the asset classes can drop to 0 for a period of time if the model calls for it. |
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Term
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Definition
| These funds may concentrate in a particular industry or geographic location. They are more risky than a fund that is more diversified. |
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Term
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Definition
| These funds invet in companies whose value is connected to gold, silver, or other precious metals. Used to protect funds against inflation. |
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Term
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Definition
| These funds specialize in foreign securities and invest all of their assets outside the US. Have more risks than domestic funds, vulnerable to exchange-rate risk and politial risk. Easiest way for Americans to diversify invest. internationally. |
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Term
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Definition
| The possibility that changes in the exchange-rates for foreign currencies will decrease the value of these funds for American investors. |
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Term
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Definition
| These funds are volatile international fund. They invest in the stocks and bonds of emerging market countries; for aggressive investors only. |
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Term
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Definition
| These funds are for people who want liquidity and safety- a place to keep their short-term savings or emergency cash reserves. Returns are generally lower than other investments. |
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Term
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Definition
| Short term debt securities, such as Treasury bills, commercial paper, negotiable certificates of deposits (CDs), and bankers' acceptances. They are clssified as a separate class of assets -cash equivalents; considered good as cash. |
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Term
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Definition
| Are short-term debt-securities issued by the US government, that mature in a year or less and are very liquid; have almost no credit risk and are extremely safe. |
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Term
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Definition
| Used to raise short-term capital for corporations, they issue this. It's a form of short-term IOU that matures in 270 days or less, used by corporations with high credit ratings; considered very safe. |
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Term
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Definition
| Used by banks, savings and loans, to raise capital. Clients deposit money with them for a specified period at a fixed rate of interest and mature in a year or so. Also known as jumbo CDs that have a min. of $100k. |
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Term
| Bankers' Acceptances (BAs) |
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Definition
| These are used to facilitate foreign trade. It's an American bank's promise to pay the money once the goods are received. |
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Term
| Principal-Protected Funds |
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Definition
| These funds typically guarantee that an investor will recieve their initial capital back (minus any sales charges) after 5 or 10 years regardless of how the markets perform. Charge higher fees; are best for conservative investors who need a lump sum at a fixed point in the future, but not good for clients seeking to minimize taxes. |
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Term
| The Wastrel Fund invests primarily in the stocks of small-cap companies, particularly in companies that have gone public for the first time. What type of fund is it? |
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Definition
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Term
The portfolio of a money-market fund might contain all of the following EXCEPT:
a. T-bills
b. Negotiable CDs
c. Preferred stock
d. Bankers' acceptances |
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Definition
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Term
| Short-term corporate debt securities that mature in 270 days or less are called: |
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Definition
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Term
Which fund would you recommend for a couple wanting to invest $2k for college education for their new baby?
Money-market fund, short-term govnt bond fund, municipal bond fund, or diversified common stock fund. |
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Definition
| Diversified Common stock fund |
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Term
| What type of fund always has a certain percentage allocated to specific types of funds? |
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Definition
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Term
Which of the following would most likely be the objective of a municiapl bond fund?
a. Capital Appreciation
b. Tax-exempt income
c. Speculation
d. Long-term growth |
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Definition
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Term
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Definition
| An expense against the funds investment income that is ued to pay for advertising. |
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Term
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Definition
| The fund's annual dividend divided by its NAV. |
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Term
| Capital Gains Distributions |
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Definition
| When a fund sells a security that has increased invalue, the profit made by selling the security is a capital gain. The fund passes the gains to the shareholders. |
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Term
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Definition
| A provision in the IRS code that allows funds to avoid paying taxes on earned income as long as they distribute 90% of theri net investment income. |
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Term
| Regulated Investment Company |
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Definition
| A fund that meets the requirements in Subchapter M, is considered one of these. |
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Term
| Conduit (Pipeline) Theory of Taxation |
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Definition
| Under this theory, the fund's obligation to pay taxes on its income flows through the fund to its shareholders. The fund only needs to pay taxes on the porportion of the income it retains. |
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Term
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Definition
| This return contains: income dividends, capital gains distributions, and appreciation in the value of the fund's shares. It measures any increase in value and assumes all dividends and gains have been reinvested. |
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Term
| How to calculate Total Return: |
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Definition
| = (Dividends + Capital Gains Distributions + Growth in NAV)/ Original NAV |
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Term
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Definition
| These costs assocated with owning funds: sales charge (commission) and the ongoing fees and expences that are deducted from the fund's returns. |
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Term
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Definition
| All the things necessary to keep the fund up and running - management fees, legal, and accounting costs, shareholder services, and office equipment. |
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Term
| How to calculate Expense Ratio: |
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Definition
| = total expenses/ Average Net assets |
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Term
The Faithless Fund has never paid any dividends to its shareholders, it's probably an:
a. High-yield corporate bond fund
b. Agressive growth fund
c. Closed-end fund
d. Sector Fund |
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Definition
| b. Aggressive growth fund |
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Term
| What are the advantages for investors in reinvesting their dividends? |
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Definition
| The effects of compounding and being able to purchase more shares with no sales charges. |
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Term
A 12b-1 plan must be approved by all of the following EXCEPT:
a. Majority of the funds outstanding shares
b. Board of Directors
c. Principal Underwriter
d. Majority of noninterested directors |
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Definition
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Term
Among other things, 12b-1 fees are used to pay:
a. Taxes
b. Commissions
c. Investment advisory fees
d. Insurance |
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Definition
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Term
| An investor who wants to konw a fund's total return during the last 10 years should look at the: |
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Definition
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Term
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Definition
| These are one-time costs associated with buying the fund's shares. All funds have them, except for no-load funds. |
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Term
| How to calculate Net Asset Value: |
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Definition
| = Total Net Assets/ # of shares outstanding |
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Term
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Definition
| It's the total net assets of a fund are the market value of all the securities and cash in its portfolio minus its liablities. It's calculated daily at 4 pm EST. It is the same as the bid. |
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Term
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Definition
| In these type of funds, the investor pays the shares' NAV plus the sales charge to buy into the fund. |
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Term
| Public Offering Price (POP) |
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Definition
| The cost of the funds NAV, plus sales charges. It is the same as the Ask. |
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Term
| How to calculate Percentage Sales Charge: |
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Definition
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Term
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Definition
| When the fund allows the investors to buy shares at NAV, but impose the sales charge when the investor redeems their shares (called a deferred sales charge). |
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Term
| Contingent Deferred Sles Charge (CDSC) |
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Definition
| The amount of the back-end loan decreases the longer the investor owns the shares. Eventually, the sales charge decreases to zero. |
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Term
|
Definition
| Mutual funds that are sold to the public at their net asset value, without any sales charges attached. For these funds the NAV = POP. |
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Term
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Definition
| A fee that some funds subtract when the shareholder reedems their shares after holding them for only a short period of time. This fee goes back into the fund's portfolio. |
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Term
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Definition
| Usually have front-end loads, but small or no 12b-1 fees. Investors purchasing large amounts my be able to have reduced sales charges through breakpoints or rights of accumulation. |
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Term
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Definition
| These shares generally have no up-front sales charges, but the investor is subject to contingent deferred sales charge if they sell before a certain period has lapsed. Most convert these th Class A shares. |
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Term
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Definition
| These shares hav an up-front sales charge, plus an annual 12b-1 fee, or level load; sometimes a contingent deferred sales charge if sold in less than 12-18 months. |
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Term
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Definition
| Are the minimum amounts of money that customers need to invest in order to receive a discount on the sales charge; mutual fund industry's version of a volume discount. |
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Term
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Definition
| Enables an investor to qualify for the discount made by breakpoints without initially depositing the entire required amount. This letter states the investor's intent to deposit additional funds over the next 13 months; may be backdated 90 days. Not binding. |
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Term
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Definition
| These permit investors to count previous purchases of the same fund in determining their sales charges. Once their cumulative purhcases reach the amount needed for a breakpoint, they receive the reduced sales charges on all their future purchases. |
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Term
A mutual fund calculates its NAV:
a. Continously
b. Daily
c. Weekly
d. As stated in its prospectus |
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Definition
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|
Term
A no-load fund may NOT have:
a. 12b-1 fee of .5%
b. Contingent deferred sales charge
c. Front-end load
d. All of the Above |
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Definition
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|
Term
| A contigent defered sales charge is a: |
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Definition
| Back-end load that is reduced over time. |
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Term
| If an investor invests $1k in a fund, but then receives a statement saying his investment is worth $950; they purchases what type of share? |
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Definition
| Class A - front-load sales charges. |
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Term
The Faithless Fund has never paid any dividends to its shareholders, it's probably an:
a. High-yield corporate bond fund
b. Agressive growth fund
c. Closed-end fund
d. Sector Fund |
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Definition
| b. Aggressive growth fund |
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Term
| Voluntary Accumulation Plans |
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Definition
| Under this type of plan, an investor agrees to invest additional money in the fund at regular invetervals. The plan requires in minimum initial investment. |
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Term
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Definition
| An investor invests the same amount each month regardless of price fluctuations. Depending on price, the investor may end up buying more or less shares depending on the price at the time of investment. |
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Term
|
Definition
| Many fund complexes permit their shareholders to exchange one of theri funds for another without having to pay any additional sales charges. |
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Term
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Definition
| Involve an agreement by an investor to invest a specified amount at regular intervals for a # of years, usual 10 or 15; there are two securities involved (fund shares and plan certificates), so investors must receive 2 prospectuses; 45 free-look period. |
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Term
|
Definition
| Up to 50% of the first year's payments may be deducted for sales charges. The maximum cumulative sales charge for all contractual plans may not equal more than 9% over the life of the plan. |
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Term
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Definition
| In this plan, the company may not deduct more than 20% in slaes charges during any one year and no more than an average of 16% over the first 4 years. |
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Term
Investors in contractual plans must receive:
a. A letter on intent
b. Shareholder approval
c. A prospectus
d. 2 prospectuses |
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Definition
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|
Term
| According to industry regulations, what is the max sales charge that mutual fund may assess if a contractual plan is NOT involved? |
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Definition
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Term
|
Definition
| An investor receives the shares's net asset value (minus any applicable deferred contingent deferred sales charges or redemption fees). Most funds allow investors redeem their shares in writing or over the phone. |
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Term
| Systematic Withdrawal Plans |
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Definition
| With these plans, investors receive regular payments from their account, but they must have a min amount to participate. Payments are made first from dividends, then from capital gains. |
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Term
| 3 payout options in Systematic Withdrawal Plans: |
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Definition
1) Fixed-dollar periodic payments
2) Fixed-percentage periodic payments
3) Fixed-shares periodic payments |
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Term
| Fixed-dollar periodic payments |
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Definition
| Payout option for people who want to receive the same amoutn of money every month. |
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Term
| Fixed-percentage periodic payments |
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Definition
| Payout option, that allows the investor to liquidate percentage of their shares at regular intervals. |
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Term
| Fixed-shares periodic payments |
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Definition
| Payout option, that allows the investor to sell a fixed # of shares at specific intervals. |
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Term
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Definition
| Are private investment pools for wealth, sophisticated investors, that are not required to register with the SEC. Invest in a wide range of securties and are organized like LLPs or LLCs. They seek absolute positive investment performance; much riskier |
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Term
|
Definition
| These have much lower minimum investment than traditional hedge funds and can be public. Very illiquid, not suitable for investors who cannot afford to lose their capital. Have complex tax structures. |
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Term
| Exchange-Traded Funds (EFTs) |
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Definition
| Similar to index funds in that each share represents an interest in an underying basket of securities representind a specific index. They are traded on an exchange and prices are continuously determined by demand. Have lower expenes, can be sold short and purchased on margin. Good for those investing a lump sum for diversification, and those implementing an asset allocation plan. |
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Term
| If an investor sells their shares, how soon must the fund send their proceeds of the sale? |
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Definition
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Term
| When liquidating an account, the investor is going to receive $100 amonth as long as the money lasts. What type of plan is being used? |
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Definition
| A fixed-dollar systematic withdrawal plan. |
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