Unit 2 Chp. 7: Pooled Investments

UIT

"An investment company with a low expense ratio and a portfolio that doesn't change" would be a description of a (blank).

Money Market MFs

(blank) are not insured by the FDIC or any other government agency.

Capital gains; Interest payments

(blank) are still taxable in regard to tax-free (tax-exempt) bonds; however, their (blank) are tax-free.

ETFs

(blank) can be purchased on margin or sold short, just like any other listed stock.

Closed end funds

(blank) do not have a sales charge.

Closed-end; Once per week

(blank) investment companies trade based upon supply and demand for their shares. As a result, their buying and selling price does not have direct relationship to the NAV of the shares. NAV is generally only computed (blank).

Class C

(blank) shares have a level load, or no sales charge to purchase, generally a 1% CDSC for one year, with a continuous 12b-1 charge.

Class B

(blank) shares have back-end loads, or a deferred sales load so investors pay the sales charge at redemption.

Class A

(blank) shares have front-end loads, or investors pay the charge at the time of purchase making it the difference between the POP and NAV. Lower costs with a low or no 12b-1 fee at all.

Types of Investment Companies

- Face Amount Certificate - UITs - Management Companies

ETN Risks

- credit risk (unsecured debt obligations) - market risk - liquidity risk (trading market may not develop) - call, early redemption, & acceleration risk - conflicts of interest

Advantages of Mutual Funds

- diversification - professional management - convenience - liquidity

Disadvantages of Mutual Funds

- general market risk (price fluctuations) - fees & expenses (mngt fees generally largest)

Risks of Structured Products

- little to no liquidity (because customized) - returns not fully realized until maturity - credit risk (strength of financial institution)

75%; 90%

A REIT is a corporation for US tax purposes; however, it can avoid being treated as such by receiving (blank) or more of its income from real estate and distributing (blank) or more of its taxable income to its shareholders.

Liabilities; Total Assets

A mutual fund's NAV is calculated daily by deducting the fund's (blank) from its (blank).

NAV; Sales charge

A mutual fund's POP is the (blank) plus any applicable (blank).

Current Income; Safety

Investors in US Government and Agency securities funds, such as Ginnie Mae, seek (blank) maximum (blank).

15%; 15%

MF investors are taxed (blank) for dividends that qualify and all capital gains distributions are from the fund's long term gains, so they are taxed at (blank).

No-load

Money market mutual funds are (blank) funds, meaning investors pay no sales or liquidation fees.

Pass-through

REITs offer dividends and gains to investors but do not (blank) losses like limited partnerships, and therefore are not considered to be DPPs.

ETNs; ETFs

While (blank) are registered under the Securities Act of 1933, (blank) register under the Investment Company Act of 1940.

Structured Note (with Principal Protection)

any product that combines a bond with a derivative component and that offers a full or partial return of principal at maturity (ex. Lehman Brothers bankruptcy)

REIT

company that manages a portfolio of real estate investments to earn profits for shareholders; normally publicly traded & serve as a source of long-term financing for real estate projects

Structured Products

products built to meet specific needs, generally involving debt