Chapter 13: Investing in Mutual Funds, ETFs, and Real Estate

Automatic investment plan

An automatic savings program that enables an investor to channel a set amount of money systematically into a given mutual fund.

Automatic reinvestment plan

A plan that gives share owners the option of electing to have dividends and capital gains distributions reinvested in additional fund shares.

back-end load

A commission charged for redeeming fund shares

exchange traded fund (ETF)

An investment company whose shares trade on stock exchanges; unlike mutual funds, ETF shares can be bought or sold (or sold short) throughout the day. ETFs are usually structured as an index fund that's set up to match the performance of a certain market segment.

net asset value (NAV)

The current market value of all the securities the fund owns, less any liabilities, on a per-share basis.

open-end investment company

A firm that can issue an unlimited number of shares that it buys and sells at a price based on the current market value of the securities it owns; also called a mutual fund.

Pooled diversification

A process whereby investors buy into a diversified portfolio of securities for the collective benefit of individual investors.

real estate investment trust (REIT)

An investment company that accumulates money by selling shares to investors, in order to invest that money in various forms of real estate, including mortgages; this type of fund is similar to a mutual fund, but a REIT invests only in specific types of real estate or real estate-related firms.

socially responsible fund (SRF)

A fund that invests only in companies meeting certain moral, ethical, and/or environmental criteria.

Systematic withdrawal plan

A plan offered by mutual funds that allows shareholders to be paid specified amounts of money each period.