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Other Securities Products > Vocabulary > Flashcards

Vocabulary Flashcards

1
Q

Investment Company

A

a corporation or a trust through which individuals invest in large, diversified portfolios of securities by pooling their funds with other investor’ funds.

Take Note: these are frequently referred to as “ pooled investment vehicles”

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2
Q

Face-amount certificate (FAC)

A

a contract between an investor and an issuer in which the issuer guarantees payment of a stated (or fixed) sum to the investor at some set date in the future.

Take Note:

  • FAC companies pay a fixed rate of return
  • FAC companies do not trade in the secondary market; they are redeemed bu the issuer
  • FAC companies are classified as investment companies
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3
Q

The Investment Company Act of 1940

A

provides for SEC regulation of investment companies and their activities

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4
Q

Unit Investment Trusts (UITs)

A

an unmanaged investment company organized under a trust indenture

  • do not have boards of directors
  • do not employ in an investment adviser
  • do not actively manage their own portfolios ( trade securities)
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5
Q

Units or Shares or Beneficial Interest

A

redeemable shares

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6
Q

Fixed UIT

A

typically purchases a portfolio of bonds and terminates when the bonds in the portfolio matures

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7
Q

Nonfixed UIT

A

purchases shares o an underlying mutual fund

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8
Q

Management Investment Companies

A

actively manages a securities portfolio to achieve a stated investment objective

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9
Q

Publicly traded funds

A

close ended investment companies
-after the stock is distributed, anyone can buy or sell shares in the secondary market either on an exchange or over the market

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10
Q

Public offerring price (POP)

A

net asset value (NAV) per share plus any applicable sales charges

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11
Q

Net Asset Value (NAV)

A

is calculated daily by deducting the fund’s liabilities from its total asset

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12
Q

Close End Company

A
  • Trades in secondary market
  • Can issue common, preferred, and bonds
  • Issues a fixed number o shares
  • Price is set by supply and demand
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13
Q

Open End Company

A
  • Investors may purchase fractional shares
  • Does not trade in the secondary market’ shares must be redeemed
  • Usually called mutual funds
  • Selling price usually includes a sales charge
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14
Q

Mutual Fund

A

pool of investors’ money invested in various securities determined by the fund’s objective

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15
Q

Class A Shares (front end load)

A

investors pay the charge at the time of purchase

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16
Q

Class B Shares ( back end load)

A

declines over time so investors pay the charge at redemption

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17
Q

Class C Shares ( level load)

A

no sales charge to purchase, generally a 1% CDSC for one year, with a continuous 12b-1 charge

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18
Q

Rights of Accumulation

A

allows an investor to qualify for reduced sales charges

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19
Q

Letter of Intent (LOI)

A

by signing a LOI the investor informs the investment company that he intends to invest the additional funds necessary to reach the breakpoint within 13 months

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20
Q

Exchange privileges

A

allows an investor to convert an investment in one fund for an equal investment in another fund in the same family at net asset value without incurring an additional sales charge

21
Q

Growth Funds

A
  • invest in stocks of rapidly growing corporations
  • tends to reinvest all or most of their profits instead of paying dividends
  • focused on generating capital gains rather than income
  • concentrates more in small cap stocks, while more conservative growth funds have a preponderance of large cap issues
22
Q

Income Funds

A
  • stresses current income over growth
  • investing in stocks o companies with long histories o dividend payments, such as utility company stocks, large cap stocks, and preferred stocks
23
Q

Combination Funds ( Growth & Income)

A

an attempt to combine companies showing long term growth potential and companies paying high dividends

24
Q

Specialized (Sector) Funds

A
  • specialise in particular economic sectors or industries
  • 25-100% of their assets invested in their specialties and more likely than other funds to stock to a relatively fixed allocation
25
Q

Special situation funds

A

buy securiites of companies that may benefit from a change within the corporations or in the economy

26
Q

Index Funds

A

securites that mirror a market index, such as the S&P 500

27
Q

Foreign Stock Funds

A

securities of companies that have their principal business activities outside of the US

28
Q

Tax Free ( tax exempt) Bond Funds

A

Tax exempt funds invest in municipal bonds or notes that produce income exempt from federal income tax
-can invest in municipal bonds and money market instruments

29
Q

US Government and Agency Securities Funds

A

securities issued by US Treasury or an agency of the US government such as GNMA. Investors in these bonds seek current income and maximum safety

30
Q

Balaced Funds

A

invest in stocks for appreciation and bonds for income, and different types o securities are purchased according to a formula

31
Q

Asset Allocation Funds

A

Split investment between stocks for growth, bonds for income, and money market instruments (or cash) for stability. The fund adviser switches the percentage of holdings in each asset category according to the performance, or expected performance, of that group.

32
Q

Money Market Funds

A

-no loads, open end investment companies

33
Q

No Loads

A

means that investors pay no sales or liquidation fees

34
Q

Comparing Mutual Funds

Focus On:

A

-Performance
-costs
taxation
-portfolio turnover
-services offered

35
Q

Portfolio Turnover Rate

A

reflects a fund’s holding erod

36
Q

Advantages to Investing in Mutual Funds

A
  • Diversification
  • Professional Management
  • Convenience
  • Liquidity
  • Minimum initial investment
37
Q

Disadvantages in Investing in Mutual Funds

A
  • Risks

- Fees & Expenses

38
Q

Exchange Traded Funds (ETFs)

A

this fund invests in a specific index such as the S&P500

39
Q

Hedge Funds

A

Limited partnership with fewer than 100 investors that does not currently have to register with the SEC-although portfolio managers are generally required to register as investment advisors

40
Q

Annuities

A

a contract between an individual and a life insurance company usually purchased for retirement income

41
Q

annuitant

A

the investor

42
Q

Fix Annuities

A

guarantees a fixed rate of return

  • payment remains constant throughout the annuitant’s life
  • bears no risk therefore is considered an insurance product and not a security
43
Q

Variable Annuity

A

has sub accounts where money can be invested in the market

-seller must have an securities license and insurance license to sell

44
Q

Combination Annuities

A

provide guaranteed payments as well as payments that keep pace with inflation
-can contribute to a fixed and variable annuity

45
Q

Index Annuity

A

market participation but with a guarantee against loss

  • follows an index
  • if the index does poorly, the annuitant may receive the IA’s minimum guaranteed return-typically 3-4%
  • there is a cap rate; returns can be capped at a certain percentage
  • negative is that they typically have longer surrender charge periods
46
Q

Assumed Interest Rate

A

is a basis for determining distributions from a variable annuity

47
Q

Last In First Out (LIFO)

A

earnings are considered to be withdrawn first from the annuity and are taxable as ordinary income

48
Q

Exclusion Ratio

A

annuitized payments are taxed according to an exclusion ratio. this expresses the percentages of the annuity’s value upon annuitization of contribution basis to the total

49
Q

Direct Participation Programs (DPPs)

A

alternative investment

  • this allows business to flow through to investors
  • are either public offerings or private placements, in each case-specific documentation are required to form and invest in the partnership

Other Securities Products (1 decks)

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