WIP CSC 2 Chapter 17: Mutual Funds - Structure and Regulation

WIP Chapter 17 Flashcards

What are the 2 different Management options?

Active Management: Manager picks securities to beat a benchmark

Passive Management: Manager simply tracks an index, accepting only market (systematic) risk

What are some advantages of Managed Products?

Professional Management: Expertise you can’t access alone

Economies of scale: Lower trading costs per dollar

Instant diversification: Even small investors can own 50-100 securities

What are some disadvantages of Managed Products?

Lack of transparency: hedge funds often don’t disclose holdings

Liquidity constraints: some funds lock up your money

High fees: 2-5% for active funds; 2-20% for many private/hedge funds

Return volatility: especially in niche or high-leverage products

What is a mutual fund?

Professionally managed investment that pools money from multiple investors to invest in a variety of assets like stocks, bonds, and other securities

What is NAVPU stand for?

Net Asset Value per Unit

What are some Mutual Fund advantages?

Low-Cost Professional Management

Broad Diversification

Variety & Transferability

Flexible Buy/Redemption

Estate & Loan Benefits

Record-Keeping & Reporting

What are some Mutual Fund disadvantages?

Costs

Short-term Unsuitability

Market Risk

Tax Timing