Mutual Funds and Investment Organizations FBLA

mutual funds

_______ are unit investment trusts closed-end investment companies open-end investment companies

open ended mutual fund

__________ shares are bought and sold on demand at their net asset value

close ended mutual fund

_________ have a fixed number of shares and are traded among investors on an exchange

hedge fund

A _____ is a private investment organization that employs risky strategies that often made huge profits for investors. Charge a 2% on assets and 20% on all profits.

money market funds

______ are accounts that pool money from individuals and invest in securities that have a short-term maturity, such as one year or less

bond funds

_____ are specialize in fixed-income sector

target date funds

_______ attempt to maintain a desirable balance of risk and growth potential based on a target retirement date

Exchange Traded Funds

_____ offer investors a way to pool their money in a fund that makes investments in stocks, bonds, or other assets and, in return, to receive an interest in that investment pool. Unlike mutual funds, however, ___ shares are traded on a national stock exchange and at market prices that may or may not be the same as the net asset value ("NAV") of the shares, that is, the value of the ___’s assets minus its liabilities divided by the number of shares outstanding.

Index-based funds

Most ETFs trading in the marketplace are index-based ETFs. These ETFs seek to track a securities index like the S&P 500 stock index and generally invest primarily in the component securities of the index. For example, the SPDR, or "spider" ETF, which seeks to track the S&P 500 stock index, invests in most or all of the equity securities contained in the S&P 500 stock index.

prime funds

_____ are money market funds that primarily invest in a variety of taxable short-term corporate and bank debt securities are generally referred to as

Private Equity Funds

Investment pools that raise capital from accredited investors, institutions, and high-net-worth individuals to buy ownership stakes in private companies or take public companies private. They aim to improve company value over several years and sell for profit. Private equity funds are typically less liquid and riskier but offer potential for high returns. Usually, institutional investors like pension funds, endowments, and wealthy individuals invest in them.

Quant Funds

The custom-built indexes for these funds use numerical methods like quantitative analysis or algorithms to select the fund's investments

managed investment companies

open-end or closed-end board of directors (elected by shareholders) hires a management company to manage the portfolio for a fee (.2-1.55 of assets) Open-end funds investors can sell their shares back to the fund at the NAV (net asset value) closed-end do not redeem or issue shares, investors must sell to other investors on organized exchanges and may have different prices than their NAV

Premium or discount on closed end fund

(price - NAV)/NAV closed end fund prices can differ from the net asset value (NAV assets - liabilities)

Other investment organizations

commingled funds real estate investment trusts hedge funds

commingled funds

partnerships of investors that bool funds, i.e. bank, insurance company, retirement accounts that are much larger than individual investors but still too small to arrant managing on a separate basis similar to open ended mutual funds except instead of shares- the fund offers units,

money market funds

mutual fund that invest in money market securities, commercial paper, repurchase agreement of certificates of deposits, average maturity in about a month, fixed as $1 share, so no capital gains/losses from redemption of shares

equity funds

mutual fund that invests primarily in stock, normally about 5% in money market securities to provide some liquidity income funds hold shares of firms with high dividend yields to provide current income growth funds are willing to forgo current income and focus on prospects for capital gains growth stocks are considered riskier than income funds

specialized sector funds

mutual fund concentrated on a particular industry, (i.e. biotech, chemicals, energy) or a particular country

bond funds

mutual fund specialize in fixed income sector can specialize in different types of bonds corporate treasury mortgage-backed securities municipal (can even be just one city or state) or specialize by maturity ranging from short-term to long-term, or specialize in credit risk of the issuer from very safe to "junk" bonds

international funds

mutual fund International funds invest in securities outside of the US Others (global funds invest in securities worldwide including US) regional funds concentrate on a particular part of the world emerging market funds invest in companies of developing nations

balanced fund

mutual funds that hold both equities and fixed income securities, most of these are "funds of funds" Life cycle funds are balanced funds can have asset mixes that differ based on age, targeted maturity funds change allocations with age, others- static- keep the same allocation

asset allocation and flexible funds

funds of funds but engaged in market timing and not low-risk investment vehicles

Fee structure of investing

operating expenses- deducted from the assets of the fund, range from 0.12% to 1.37% marketing distribution costs, used to pay brokers or financial advisors loads front-end back-end 12b-1 charges Note loads are only paid once, but 12b-1 fees are paid annually so if a long term horizon may be better to pay a load

front end load

commission or sales charge paid when shares are purchased, must not exceed 8.5% low-load funds are < 3% no-load funds have no front-end sales charges

back end load

exit fee incurred when you sell shares Maybe 5-6%, usually reduced the longer you own the fund

benefits of ETFs

sold throughout the day cheaper than mutual funds-lower management fees

taxation of mutual fund income

pass-through-status taxes are paid by the investor and not the mutual fund itself one disadvantage for individual investors is you can't time your capital gains and dividends investor has no ability to engage in tax management

Federal funds

Unsecured deposit in Federal Reserve from depository institutions

Mutual Fund advantages

Record keeping and administration Diversification and divisibility. Professional management Lower transactions costs

Funds of Funds

Mutual funds that primarily invest in shares of other mutual funds.

load

a sales commission charged on a mutual fund

Estate Clearance Fund

cash needed for burial expenses, uninsured medical bills, and taxes

NAV

Measure a mutual fund's price is based on

Disclosures of a mutual fund

The data represents past performance and is not an indication of future results, an investor's principal value will fluctuate and may be worth less than the original amount invested

Fund family

A group of funds managed by the same company (Vanguard, Fidelity, T Rowe Price)

Public offering price of a mutual fund

What investors must pay: NAV + sales charges

Closed-end funds 2%

shares are bought and sold among investors in the marketplace, the fund itself is not involved. Prices are quoted on the exchange, 25% equity funds and 75% bond funds. Usually sell at a discount of 5%-15% to NAV.

Open-End Funds 98%

Open-end funds shares are bought from the fund and redeemed by the fund. They grow by attracted new investors, and can be negatively-impacted by excessive redemptions.

Mutual Fund Fees

Fees cover the cost of selling & operating a fund. All fees must be revealed in the prospectus. Funds with high expenses tend to be poorer performers. Mutual fund fees are declining, but MF are still very profitable.

Annual 12b-1 fee

Covers the cost of marketing the fund

Commingled & Common Trust Funds

partnerships of investors that pool their funds. Designed for trusts or larger retirement accounts to get professional management for a fee.

What is the difference between a stock and mutual fund?

stock is to a mutual fund as a tree is to a forest a stock is just an investment in one company, wheel mutual fund allows you to invest in many different companies at one time

Target Date Funds

attempt to maintain a desirable balance of risk and growth potential based on a target retirement date