Chapter 5: Product Information - Investment Company Securities And Variable Contracts Flashcards
(97 cards)
75% of a portfolio, 5% or less of assets into one company, 10% or less of one company’s outstanding voting shares owned
75-5-10 rule
Owns a piece of all the ingredients in the portfolio:
Undivided interest concept
Would keep track of all the dividends and capital gains distributions:
1099-DIV
Investors receive one semi-annual report and one annual report from the fund:
Mutual fund
Grow profits faster than competitors and/or overall stock market, P/E ratio, dividend income would be secondary goal:
Growth fund
Seek out companies valued much less than actually worth, high dividend yields, very conservative:
Value funds
More aggressive than value funds, and less volatile than growth funds, “middle of the road approach”, allows investors to get a diversified investment that can also maximize growth potential:
Blend/core funds
Buy equities that provide dependable income, dividend income is main reason for purchase, receiving dividends reduce the volatility of an investment
Equity income funds
Keeps large percentage of its assets in both the stock and bond markets:
Balanced fund
Invests in companies located anywhere but the US:
International fund
Invests in companies located and doing business anywhere in the world, including the US:
Global funds
Typically no sales charges and low expenses and management fees:
Index funds
Can’t do well during a slump and is considered volatile/high risk:
Specialty fund
If the investor is not in a high tax bracket of investing in an IRA, 401(k), etc., recommend:
Taxable bond funds
If the investor is in a taxable accountant wants to earn interest exempt from federal income tax, recommend:
Tax-exempt bond fund
Buy short-term obligations of states, counties, cities, school districts, etc., pay low rates of interest, should be sold to top marginal tax bracket investors:
Tax-exempt money market funds
Opened to sophisticated, accredited investors, illiquid (at least 1 year), risky strategies, charge high management fee and 20% of gains, private investment partnership (limited):
Hedge funds
Expensive, limits upside of profits made, for conservative investors who need a lump sum at a fixed point in the future, no income for a while, lock-up period (5-10 years), dividends/capital gains must be reinvested, sales charge and operating expenses are high:
Principal-protected funds
Has over $1 million in net worth and makes >$200,000 per year. A married couple, assets held jointly count toward the $1 million, and income needs to be >$300,000:
Accredited investor
Funds that are more rigid in their percentages compared to a balanced fund:
Asset allocation funds
A mutual fund that holds shares in a bunch of other mutual funds, expense ratios tend to be expensive, sales charges may be high:
Funds of funds
Provides information on the party managing the portfolio (investment adviser/portfolio manager):
Prospectus
Not all funds have sales charges or redemption fees, but all funds have expenses:
True
Indicates the administrative efficiency/effectiveness of the fund, may be a tiebreaker when choosing between similar funds:
Expense ratios