Chapter 5: Product Information - Investment Company Securities And Variable Contracts Flashcards Preview

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Flashcards in Chapter 5: Product Information - Investment Company Securities And Variable Contracts Deck (97)
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Owns a piece of all the ingredients in the portfolio:

Undivided interest concept

1

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

2

Would keep track of all the dividends and capital gains distributions:

1099-DIV

3

Investors receive one semi-annual report and one annual report from the fund:

Mutual fund

4

Grow profits faster than competitors and/or overall stock market, P/E ratio, dividend income would be secondary goal:

Growth fund

5

Seek out companies valued much less than actually worth, high dividend yields, very conservative:

Value funds

6

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

7

Buy equities that provide dependable income, dividend income is main reason for purchase, receiving dividends reduce the volatility of an investment

Equity income funds

8

Keeps large percentage of its assets in both the stock and bond markets:

Balanced fund

9

Invests in companies located anywhere but the US:

International fund

10

Invests in companies located and doing business anywhere in the world, including the US:

Global funds

11

Typically no sales charges and low expenses and management fees:

Index funds

12

Can't do well during a slump and is considered volatile/high risk:

Specialty fund

13

If the investor is not in a high tax bracket of investing in an IRA, 401(k), etc., recommend:

Taxable bond funds

14

If the investor is in a taxable accountant wants to earn interest exempt from federal income tax, recommend:

Tax-exempt bond fund

15

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

16

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

17

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

18

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

19

Funds that are more rigid in their percentages compared to a balanced fund:

Asset allocation funds

20

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

21

Provides information on the party managing the portfolio (investment adviser/portfolio manager):

Prospectus

22

Not all funds have sales charges or redemption fees, but all funds have expenses:

True

23

Indicates the administrative efficiency/effectiveness of the fund, may be a tiebreaker when choosing between similar funds:

Expense ratios

24

Cover distribution expenses and leaves a profit for the underwriter/sponsor/distributor of the fund:

Sales charge

25

The maximum allowed sales charge:

8.5%

26

Sales charge, redemption fee:

Shareholder fees

27

Management fee, 12b-1 fee, custodial fee, transfer agent fee, consulting and legal work, board of directors salaries:

Expenses

28

Capital appreciation, dividends, capital gains:

Total return

29

Are not short term investments:

Mutual funds