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23 Cards in this Set
- Front
- Back
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a mutual fund that charges a commission when shares are bought; also known as a front end load fund.
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load fund
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a mutual fund that does not charge a commission when shares are bought.
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no load fund
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a mutual fund that charges a small commission (2 to 3%) when shares are bought
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low load funds
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a commission charged on the sale of shares in a mutual fund.
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back end load
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fee charged by some mutual funds to cover management and other operating costs; amounts to as much as 1% of the average net assets
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12 (b)-1 charge
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what three key services does the financial system provide for savers and borrowers?
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risk sharing, liquidity, and information
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like financial markets, financial intermediaries have what two tasks?
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matching savers and borrowers and providing risk sharing, liquidity, and information services
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pool the funds of many small savers to lend to many individual borrowers
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intermediaries
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take money from lenders (savers) and give it to borrowers inorder to provide liquidity, risk sharing, and information.
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financial intermediaries
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primary goals are capital gains and long-term growth
Invest in large, well-established companies with above-average growth potential Little or no dividend income Moderately risk investments for more aggressive investors |
growth fund
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highly speculative mutual fund that seeks large profits from capital gains
Invest in small, unseasoned companies with high price/earnings ratios Often look for turnaround situations Prices are often highly volatile High risk investments for very aggressive investors |
aggressive growth fund
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seeks stocks that are undervalued in the market
Focus is on intrinsic value of stocks and requires extensive fundamental analysis Invest in stocks with low P/E ratios, high dividend yields and promising futures Looks for undiscovered companies with potential for future growth Less risky investments for relatively conservative investors looking for moderate growth |
value fund
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emphasizes current income and capital preservation
Focus is on high current income with some long-term capital appreciation Invest in high-yielding common stocks, convertible securities or preferred stocks Invests in “blue chip” stocks and other high-grade securities Typically less price volatility than overall stock market Less risky investments for relatively conservative investors looking for moderate growth |
equity income fund
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generates a balanced return of both current income and long-term capital gains
Invest in blend of fixed-income securities and common stocks, with 30% to 40% in fixed income Allocation between stocks and bonds typically remains constant or varies very little Emphasis between fixed-income and common stocks can be shifted as market conditions change Less risky investments for relatively conservative investors looking for moderate growth |
balanced fund
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seeks both long-term growth and current income, with primary emphasis on capital gains
Focus is on long-term capital appreciation with some high income to provide limited stability Invest in blend of commons stocks and fixed-income securities, with up to 90% in common stocks Moderate risk investments for investors who can tolerate moderate price volatility |
growth and income fund
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invests in various kinds and grades of bonds, with income as primary objective
Advantages of bond funds over individual bonds: More liquid Offer high diversification Bond funds automatically reinvest interest Lower risk investments for investors who are looking for steady income Some price volatility occurs with changing interest rates |
bond funds
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invest in tax-exempt securities issued by states and political subdivisions
Single-state fund: invests in municipal issues of only one state to provide double tax-free income |
Municipal bond funds
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buys and holds a portfolio of stocks (or bonds) equivalent to those in a specific market index
Objective is to match, not beat, the specific index Strategy is buy-and-hold, which provides tax advantages with very little taxable capital gains Operating costs are very low due to low turnover in investment portfolio |
index fund
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investments are restricted to a particular segment of the market
Investments are concentrated in one specific industry sector Objective is to produce capital gains Considered speculative because limited diversification can increase investment risks |
sector funds
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funds that actively and directly incorporate ethics and morality into the investment decision
Specific stocks are evaluated on financial criteria and moral, ethic or environmental tests Stocks that do not meet these tests are not considered for the investment portfolio Examples of excluded companies: Tobacco or alcohol Gambling Nuclear energy Returns may be reduced due to limited investment opportunities |
socially responsible funds
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funds that do all or most of their investing in foreign securities
Objective is to benefit from changes in: International market conditions Valuation of U.S. dollar Funds can specialize in international stocks, bonds or money market securities Funds can specialize in growth, value, aggressive growth and other types of stocks Funds can specialize in specific countries or regions of the world Considered fairly high-risk due to currency exchange risks |
international funds
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Avoid closed-end funds trading at ------
Look for closed-end funds trading at ------ |
premium, discount
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have greater liquidity
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open end funds
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