3. Mutual Funds and Other Investment Companies

Flashcards covering key terms and concepts related to mutual funds and investment companies from the lecture notes.

Mutual Funds

Investment vehicles that pool funds from individual investors to invest in a diversified portfolio of securities.

Net Asset Value (NAV)

The value per share of a mutual fund, calculated as the market value of assets minus liabilities, divided by shares outstanding.

Unit Investment Trusts (UITs)

Investment companies that offer a fixed portfolio of uniform assets, which are unmanaged.

Managed Investment Companies

Investment companies that actively manage a portfolio of investments; includes open-end and closed-end funds.

Open-end Funds

Mutual funds that issue and redeem shares based on investor demand, priced at NAV.

Closed-end Funds

Investment companies with a fixed number of shares that trade on an exchange, priced at a premium or discount to NAV.

Exchange Traded Funds (ETFs)

Investment funds traded on stock exchanges, similar to stocks, which can be sold short or purchased on margin.

Investment Costs

Fees associated with investing in mutual funds, including operating expenses, front-end loads, and back-end loads.

Performance of Mutual Funds

The returns generated by mutual funds, which can be impacted by management fees and market performance.

Pass-through Taxation

Tax structure where funds are not taxed at the corporate level; investors pay taxes on fund distributions.

Sources of Information on Mutual Funds

Platforms and organizations such as Morningstar and the Investment Company Institute that provide data on mutual funds.