8. Collective investments

Question 1

4x main collective investments

Answer 1

Unit trusts
Investment trusts
Investment bonds
OEIC’S

Question 2

4X benefits for Collecting Investments

Answer 2

1. Diversification
2. Reduced dealing costs
3. Wide choice of funds
4. Investment manager expertise

Question 3

Unit trusts

Answer 3

A pooled investment , which is open ended

Accumulation units -reinvest income for growth

Distribution units- split off any income

Question 4

Offer price

Answer 4

Price which investors buy units

Question 5

The Bid Price

Answer 5

Price to buy back units from investors

Question 6

Cancellation Price

Answer 6

Minimum permitted bid price

Question 7

Bid offer spread

Answer 7

The difference between the price at which a unit is offered to an investor and the person buys back.

Question 8

Contract Note

Answer 8

specifies the fund and the number of units .the unit price and the amount paid .

Question 9

The unit certificate

Answer 9

this specifies the fund and the number of units held and is the proof of ownership of the units

Question 10

3x How are units in a unit trust bought and sold?

Answer 10

1. A stockbroker
2. A financial advisor
3. investment trust manager

Question 11

Net asset value per share

Answer 11

Total value of the investment fund divided by the number of shares

Question 12

Gearing

Answer 12

The level of debt as a percentage of a company equity . It is a way of measuring the extent to which a company operations are funded by borrowing rather than by shareholder capital

Question 13

Split-capital investment trust *

Answer 13

Income shares = income and no growth

Capital shares= growth and no income

Question 14

Real estate Investment trust

Answer 14

1. No corp tax
2. stamp duty reserve tax is charged at 0.5% on purchase
3. No individual shareholder can own more then 10%

Question 15

OEIC

Answer 15

Open ended Investment company

Question 16

Split capital Investment

Answer 16

Income shares - whole income but no growth

Capital shares- No income but share capital Growth at end of term

Question 17

An initial or buying charge

Answer 17

Added to the unit price and is normally in the region of 3 per cent to 5 per cent of value of individuals investment

Question 18

Annual Management charges

Answer 18

based on the value of the fund- the range of annual management charges is typically between 0.5% and 1.5%

Question 19

Dilution Levy

Answer 19

This may be added to the unit price on a sale of shares or deducted from the price on sale of shares in situations

Question 20

Endowments

Answer 20

Investment based of life assurance

Question 21

Friendly society plans

Answer 21

Mutual self help organisations

tax exempt savings

£270 a year tax free

Question 22

Top Slicing

Answer 22

1.The gain on the policy
Surrender value+Withdrawals non taxed-original investment

2.Gain divided by the number of complete policy years

Question 23

Non Main stream Pooled investments (NMPI)

Answer 23

A unit I an unregulated  collective investment 
A unit qualified investor scheme
A security issued by a  vehicle
A traded life policy 
rights or interest in any investment

Question 24

Structured products

Answer 24

Offer protection up to 100%
Investment product
Higher returns higher risk

Question 25

SCArPS

Answer 25

structured capital at risk

product that provides an income

Question 26

Non Scarp

Answer 26

promises to provide a return of 100% invested

Question 27

risks associated with structured products

Answer 27

1. Counter-party risk
2. Inflation
3. Market