Mutual Funds and Other Investment Companies

This set of flashcards covers key vocabulary and concepts related to mutual funds and investment companies, suitable for exam preparation.

Investment Company

Financial intermediaries that pool money from investors to purchase a diversified portfolio of assets.

Net Asset Value (NAV)

The value of an investment fund's assets minus its liabilities, often expressed on a per-share basis.

Unit Investment Trust

A type of investment company that pools money from investors to invest in a fixed portfolio for the fund's lifetime.

Managed Investment Companies

Companies that actively manage a portfolio of securities to achieve specific investment objectives.

Open-End Fund

A managed investment company that issues or redeems shares at the net asset value.

Closed-End Fund

A managed investment company that issues shares that cannot be redeemed; they are traded at market prices that may differ from their NAV.

Operating Expenses

Costs incurred by a mutual fund for its daily operations.

Front-End Load

A commission or sales charge paid when purchasing shares in a mutual fund.

Back-End Load

An exit fee incurred when selling shares in a mutual fund.

12b-1 Charges

Annual fees charged by a mutual fund to cover marketing and distribution costs.

Portfolio Turnover

The ratio of trading activity to the assets of a portfolio, which may affect an investor's tax liability.

Exchange-Traded Funds (ETFs)

Investment funds that are traded on stock exchanges, similar to stocks.

Market Timing

The strategy of buying and selling in order to exploit market fluctuations, which can lead to unfair advantages for certain investors.

Transparent Pricing

A practice where the net asset values of funds are adjusted to reflect fair market conditions.

Balanced Funds

Mutual funds that maintain a stable proportion of both equity and fixed-income securities.