Chapter 10-19 Excluding 17
Bond Funds and Other Funds
*huge list probably don't have to know.
Stock Funds list- *huge
*probably don' have to know.
What major factors influence the cost of home insurance?
-Where you live -the type of structure -coverage amount -policy type NOTE: You can get discounts for things like having smoke detectors or being claim free for a while. To get cheaper home insurance: -compare companies -reduce the value of their home -get fire alarms
What factors influence how much a person pays for car insurance?
-the type of car you drive -your rating territory -your driver classification Getting discounts include: driving safe, installing security device such as fuel shutoff switch
Withdrawal Options (4 of them)
1. May withdraw a specified fixed dollar amnt each investment period(3months) 2. Liquidate or sell of a certain number of shares each investment period. 3. Third Options: withdraw a fixed percentage of asset growth. Principal untouched. 4. Withdraw all asset growth by the fund during an investment period. Principal remains untouched. *pic shows number 3 or 4.
Property Owners face 2 types of risk
1. Physical damage cause by hazards such as fire,wind,water,etc 2. Loss of use - due to robbery burglary etc.
Open-end mutual funds and its 4 options
1. Regular accounts transactions - most popular and least complicated. You decide how much money to invest and when. 2. Voluntary Savings plan - main advantage over reg. account transactions is that you can make smaller purchases than the minimum declared above. 3. Contractual Savings Plan - aka periodic payment plans - require you make regular purchases over a specified period of time usually 10-20 yrs. Sometimes known as front-end load plans cuz all the commissions are paid in the first few years. 4. Reinvestment Plan- (Flashcard) - service provided by an investment company in which income dividends and capital gain distributions are automatically reinvested to purchase additional shares of the fund.
What are the Risk Management Methods
1. Risk Avoidance 2. Risk Reduction 3. Risk Assumption 4. Risk Shifting Risk avoidance- as the name suggests. Risk reduction - like reducing risk of injury by wearing seat belt. Risk assumption- taking the risk, assuming it, like not getting colision insurance on an older car. Accident -> you bear the cost. Self insurance falls under this. Risk Shifting- most common method of dealing w/ risk. Transfer it to an insurance company or some other organization.
What are the types of risk? (pure risks)
1. personal risks 2. Property risks 3. Liability risks *personal risk*- uncertainties surrounding loss of income or life due to premature death, illness, disability, old age, or unemployment. *property risk* - uncertainties of direct or indirect losses to personal or real property due to fire, windstorms, accidents, theft, and other hazards. *liability risk* - possible losses due to negligence resulting in bodily injury or property damage to others.
Taxes and Mutual Funds
Income dividends, capital gains distrubitions, and losses from the sale of closed-end, exchange traded, or open-end funds are subject to taxation.' Problems: almost all investment companies allow you to reinvest dividend income and capital gain distributions but you are still going to be taxed for it as if you received cash. You also have no control over when the mutual fund sells securities and when you will be taxed on capital gain distributions.
Purchase Options-just read
Key point: Mutual fund supermarket offers 2 advantages. First: instead of dealing with numerous investment companies you can use just one call or internet site to purchase shares. Second: you receive one statement from the brokerage firm instead of receiving a statement from each investment company you deal with.
Types of homeowners insurance and their respective coverage
Not in picture: Country Home Form - nonfarm business residents with coverage on agricultural buildings and equipment.
Why Choose an Index fund or a Managed fund?
Over many years, the majority of managed mutual funds fail to outperform the S&P 500 index. The main reason is the lower fees associated with index funds. The concept behind index funds is based on the efficient market hypothesis which states that is it impossible to consistently beat the market without raising your risk level.
Mutual Fund Prospectus and Annual Report
You should read completely before investing.
Contingent Deferred Sales Load or "B" fund or Back-end load fund
a 1 to 5 percent charge that shareholders pay when they withdraw their investment from a mutual fund
General Obligation Bond
a bond backed by the full fail, credit, and unlimited taxing power of the government that issued it
Registered Coupon Bond
a bond registered for principal only and not for interest
Convertible Bond and their advantages
a bond that can be exchanged, at the owners' option, for a specified number of shares of the corporation's common stock Interest rates on a convertible bond or note is often 1 to 2 percent lower than nonconvertible bonds or notes. Conversion feature also attracts investors who are interested in the speculative gain that conversion may provide. Lastly, if the investor converts to common stock the corporation no longer has to redeem the bond or note at maturity.
Debenture
a bond that is backed only by the reputation of the issuing corporation *most corporate bonds are these.
Bearer Bond
a bond that is not registered in the investor's name
Registered Bond
a bond that is registered in the owner's name by the insuring company
Revenue Bond
a bond that is repaid from the income generated by the project it is designed to finance
Zero-Coupon Bond
a bond that is sold at a price far below its face value, makes no annual or semiannual interest payments, and is redeemed for its face value at maturity
Driver Classification
a category based on the driver's age, sex, marital status, driving record, and driving habits; used to determine automobile insurance rates
Actual Cash Value (ACV)
a claim settlement method in which the insured receives payment based on the current replacement cost of a damaged or lost item, less depreciation
Replacement Value
a claim settlement method in which the insured receives the full cost of repairing or replacing a damaged or lost item
Mortgage Bond
a corporate bond secured by various assets of the issuing firm
Corporate Bond
a corporation's written pledge to repay a specified amount of money with interest *can be debentures(most common), mortgage bond, or subordinated debenture. *picture explains why investors purchase corporate bonds.
Municipal Bond
a debt security issued by a state or local government *most important feature is that inteest on them may be exempt from federal taxes.
Hazard
a factor that increases the likelihood of loss through some peril
Call Feature
a feature that allows the corporation to call in or buy outstanding bonds from current bondholders before the maturity date
12b-1 Fee
a fee than an investment company levies to defray the costs of distribution and marketing a mutual fund and commissions paid to a broker who sold you shares in the mutual fund * another type of fee is a management fee typically between 0.5 and 1 percent.
Trustee
a financially independent firm that acts as the bondholders' representatives
Closed-Ended Fund
a find whose shares are issued by an investment company only when the fund is organized
Exchange Traded Fund (ETF)
a fund that generally invests in the stocks or other securities contained in a specific stock or securities index While they are similar to closed-end funds there is a important difference. Closed-end funds are typically actively managed while ETF's typically are just investments in a specific index without active management. Thus ETF's generally have lower fees. There is no minimum investment amount. You can use limit orders and selling short and margin to buy and sell ETF shares. They are traded like stocks thus investors must pay comissions when they buy and sell shares.
Sinking Fund
a fund to watch annual or semiannual deposits are made for the purpose of redeeming a bond issue
Family of Funds
a group of mutual funds managed by one investment company *picture for details/elaboration
Bond Indenture
a legal document that details all of the conditions relating to a bond issue
Household Inventory
a list or other documentation of personal belongings, with purchase dates and cost information
Load Fund - "A" fund
a mutual fund in which investors pay a commission (as high as 8.5 percent) every time they purchase shares. The comission is sometimes referred to as the sales charge.
No-Load Fund
a mutual fund in which the individual investor pays no sales charge. They don't charge commissions when you buy shares, cuz they have no salespeople. You have to deal directly with an investment company. Note: a mutual fund that charges a 4 percent load fee but has above average annual returns over a long period of time may provide better returns than a no-load fund that has average performance.
Open-End Fund
a mutual fund whose shares are issued and redeemed by the investment company at the request of investors. Makes up 82% of mutual Funds * cannot trade during the day as selling or buying occurs only at end of the trading day. If you owned shared in closed end or ETF you can sell your shares during the day.
Insured
a person covered by an insurance policy
Policyholder
a person who owns an insurance policy
Coinsurance Clause
a policy provision that requires a homeowner to pay for part of the losses if the property is not insured for the specified percentage of the replacement value
Speculative Risk
a risk in which there is a chance of either loss or gain *most speculative risk are considered to be uninsurable
Pure Risk
a risk in which there is only a chance of loss; also called "insured risk" - are accidental and unintentional risks for which the nature and financial cost of the loss can be predicted. - *Personal, property, and liability risk are considered pure risks*
Insurance Company
a risk-sharing firm that assumes financial responsibility for losses that may result from an insured risk
Reinvestment Plan
a service provided by an investment company in which income dividends and capital gain distributions are automatically reinvested to purchase additional shares of the fund
Vicarious Liability
a situation in which a person is held legally responsible for the actions of another person
Strict Liability
a situation in which a person is held responsible for intentional or unintentional actions
Bond Ladder
a strategy where investors divide their investment dollars among bonds that mature at regular intervals in order to balance risk and return
Policy
a written contract for insurance
Yield to Maturity
a yield calculation that takes into account the relationship among a bond's maturity value, the time to maturity, the current price, and the dollar amount of interest
Personal Property Floater
additional property insurance to cover the damage or loss of a specific item of high value
Expense Ratio
all the different management fees, 12b-1 fees, if any, and additional fund operating costs for a specific mutual fund picture shows typical fees and expenses.
Endorsement
an addition of coverage to a standard insurance policy
No-Fault System
an automobile insurance program in which drivers involved in accidents collect medical expenses, lost wages, and related injury costs from their own insurance company
Insurer
an insurance company
Subordinated Debenture
an unsecured bond that gives bondholders a claim secondary to that of other designated bondholders with respect to interest payments, repayment, and assets
Uninsured Motorists Protection
automobile insurance coverage for the cost of injuries to a person and members of his or her family caused by a driver with inadequate insurance or by a hit-and-run driver
Property Damage Liability
automobile insurance coverage that protects a person against financial loss when that person damages the property of others
Comprehensive Physical Damage
automobile insurance that covers financial loss from damage to a vehicle caused by a risk other than a collision, such as fire, theft, glass breakage, hail, or vandalism
Collision
automobile insurance that pays for damage to the insured's car when it is involved in an accident
Serial Bonds
bonds of a single issue that mature on different dates
Risk
chance or uncertainty of loss; also used to mean "the insured"
Assigned Risk Pool
consists of people who are unable to obtain automobile insurance due to poor driving or accident records and must obtain coverage at high rates through a state program that requires insurance companies to accept some of them
High-Yield Bonds
corporate bonds that pay higher interest, but also have a higher risk of default
Homeowner's Insurance
coverage for a place of residence and its associated financial risks Covers your: *House*- protect from damage or destruction to home or other structures. *Additional living expenses*- cost of living in temp location while your house is being repaired. *Personal property* - household belongings up to a certain limit. Say you have a 100k house you might have 70% coverage or up to 70K in personal belongings covered. There are limits for the theft of certain things bt you can get personal property floater to cover that. *personal liability*- someone gets hurt on your property or maybe you break a expensive vase at your friends place. Typically covers 100k. NOTES: usually does not cover floods and earthquakes. Renters insurance- protection of personal property while renting a home or apartment.
Bodily Injury Liability
coverage for the risk of financial loss due to legal expenses, medical costs, lost wages, and other expenses associated with injuries cause by an automobile accident for which the insured was responsible
Current Yield
determined by dividing the annual dollar amount of income generated by an investment by the investment's current market value
Negligence
failure to take ordinary or reasonable care in a situation
Maturity Date
for a corporate bond, the date on which the corporation is to repay to borrowed loan
Medical Payments Coverage
home insurance that pays the cost of minor accidental injuries on one's property; automobile insurance that covers medical expenses for people injured in one's car or as a pedestrian
Liability
legal responsibility for the financial cost of another person's losses or injuries
Advantages and Disadvantages of investing in mutual funds.
note.
Why bonds could be good
note.
Calculating Total return - kinda obvious
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16-3, 16-4 Summary
pic - quick overview
16-1 , 16-2 Summary
pic -quick overview
Difference between bonds and stocks
pic.
Typical Fees Associated with Mutual Fund Investments Difference between Class A, B, C shares
pic.
What is not covered by home insurance
pic.
Automobile Insurance major categories
pic. Other Automobile Insurance Coverages include Wage loss insurance which gives you money due to lost income from an automobile injury Towing and emergency road service coverage pays for the cost of breakdowns and mechanical assistance.
Coverage practice
pic. probably dont have to know
Mutual Fund Major Reasons why investors purchase invesmt
pools the money of many investors- its shareholders- to invest in a variety of securities Main Reasons Include: 1. Professional Management 2. Diversification Management note: if they have performed well under its present manager over 5 years 10 years or longer it will likely perform well under that manager in the future.
Insurance
protection against possible finance loss - based on the principle of pooling risks
Financial Responsibility Law
state legislation that requires drivers to prove their ability to cover the cost of damage or injury caused by an automobile accident
Umbrella Policy
supplementary personal liability coverage; also called a "personal catastrophe policy"
Premium
the amount of money a policyholder is charged for an insurance policy
Peril
the cause of possible loss
Net Asset Value (NAV)
the current market value of the securities contained in the mutual fund's portfolio minus the mutual fund's liabilities divided by the number of shares outstanding
Face Value
the dollar amount the bondholder will receive at the bond's maturity
Income Dividends
the earnings a fund pays to shareholders from its dividend and interest income
Capital Gain Distributions
the payments made to a fund's shareholders that result from the sale of securities in the fund's portfolio
Turnover Ratio
the percentage of a fund's holdings that have changed or "been replaced" during a 12-month period
Rating Territory
the place of residence used to determine a person's automobile insurance premium
Self-Insurance
the process of establishing a monetary fund to cover the cost of a loss
Yield
the rate of return earned by an investor who holds a bond ofr a stated period of time
Government Bond
written pledge of a government to repay a specified sum of money, along with interest.
