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25 Cards in this Set
- Front
- Back
what is one of the most important reasons for owning mutual funds?
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portfolio diversification
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relieves investors of many of the day to day management and record keeping chores
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full time professoinal management
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another advantage of mutual funds is that it can be started with a modest ----- ----
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capital outlay
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what are some of the services that mutual funds provide creating another advantage of them?
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automatic reinvestment of dividends, withdrawl plans, and exchange privileges.
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-Portfolio Diversification
Owning numerous securities reduces risk -Professional management -Ability to invest small amounts -Service Automatic reinvestment of dividends Withdrawal plans Exchange privileges -Convenience Easy to buy and sell; high liquidity Funds handle recordkeeping Easy to track prices |
advantages of owning a mutual fund
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mutual funds are relatively easy to acquire, the funds handle the paperwork and record keeping, their prices are widely quoted, and it is possible to deal in fractional shares
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convenience of mutual funds
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commonly used to describe an open end investment.
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the term mutual fund
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there is never any trading of shares between individuals in an open end fund. T/F
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TRUE
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a type of investment company in which investors buy shares from, and sell them back to, the mutual fund itself, with no limit (other than investor demand) on the number of shares the fund can issue
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open end investment company
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open end funds can temporarily close themselves to new investors T/F
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True
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are the dominat type of investment company and account to well over 95% of the assets under management
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open end mutual funds
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both buy and sell transactions in open end mutual funds are carried out at prices based on current market value of all securities held in the funds portfolio is known as the funds
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net asset value (nav)
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the underlying value of a share of stock in a particular mutual fund. (found by taking the total market value of all assets held by the fund, less any liabilities, and dividing this amount by the number of fund shares outstanding)
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net asset value (nav)
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operate with a fixed number of shares outstanding, and do not regularly issue new shares of stock.
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closed end investment companies
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unlike open end funds, all trading in closed end funds is done between ------
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investors in the open market
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Investors buy and sell shares directly with the mutual fund company without a secondary market
Have an unlimited number of shares Purchase and selling price is determined by the Net Asset Value (NAV) of the fund All purchases and sales are completed at the end of the day after the stock markets have closed |
characteristics of open end companies
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Sell only the initial offering
Subsequent trades are done in a secondary market, similar to the common stock market Have a limited number of shares Investment advisor doesn’t have to worry about cash inflow or outflows Purchase and selling price is determined by supply and demand Generally sell at premium or discount (usually discount) to NAV |
closed end investment companies
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have a fixed amount of capital to work with
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closed end funds
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A basket of securities designed to track a specific market index
Similar to index mutual funds Trade like individual stocks on stock exchanges Can buy and sell ETFs any time of the day Low management expenses due to limited trading by investment advisor Low turnover helps avoid taxes until ETF is sold Types of ETFs “Diamonds” (DIA) track DJIA “Spiders” (SPY) track S&P 500 “Qubes (QQQ) track NASDAQ 100 |
exchange traded fund (etf)
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an open end mutual fund that trades as a listed security on a stock exchange
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exchange traded fund
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the most popular etf's (qubes, diamonds, and spiders) are structured as ------ and-----
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unit investment trusts and as grantor trusts (give the shareholder certain ownership rights that are not available with the other two forms)
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most etf's are structured as
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open end funds
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ETF's offer professional money management of traditional ------- and the liquidity of an ---------
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mutual funds, exchange traded stock
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closed end funds and etf's require a commission be paid but costs of open end mutual funds however depends on types of ---- --- ---- -----that the fund levies on its investors
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fees and load charges
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etf's are structured as -------, ------ and-----
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open end mutual funds, unit investment trusts, or grantor trusts
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