Ch 13 - investing in mutual funds, ETF, and real estate
Closed-End Investment Companies
-Have fixed number of shares -Trading between investors in market -Shares are listed and trade at a discount or premium to NAV
Net assets value (NAV)
-Total market value of all securities held in fund's portfolio less liabilities, divided by number of shares outstanding -Will fluctuate in value as underlying shares of stock owned by the fund go up or down. -Only determined at the end of the trading day -This is the quoted price for the next day of trading
Automatic Reinvestment Plans
A plan that gives share owners the option of electing to have dividends and capital gains distributions reinvested in additional fund shares. Supports earning interest-on-interest.
Pooled diversification
A process whereby investors buy into a diversified portfolio of securities for the collective benefit of individual investors.
Conversion Privileges
Allows investor to switch from one mutual fund to another within the family of funds. For example, you could move from Fidelity Growth Fund to Fidelity Growth and Income Fund without withdrawal fees. For tax purposes, this is a sale and purchase. Thus, gains on sale may be taxed.
Exchange traded fund (ETF)
An investment company whose shares trade on stock exchanges; unlike mutual funds, the shares can be bought or sold (or sold short) throughout the day. - are usually structured as an index fund that's set up to match the performance of a certain market segment. -Like a mutual fund, allows investor to achieve diversification with professional management of funds.
Automatic Investment Plans
An investment option that allows fund shareholders to funnel fixed amounts of money from their paychecks or bank accounts automatically into a mutual fund -An automatic savings program that enables an investor to channel a set amount of money systematically into a given mutual fund. In many cases, it can be a payroll deduction form your paycheck. Or, it can be transferred from a checking account.
Convenience
Easy to purchase mutual funds and the fund handles all of the tax reporting and record keeping.
Financial Returns
Investors hope the mutual fund will achieve higher returns than they can generate on their own.
Retirement Plans
Mutual Funds offer IRAs and other retirement accounts that are tax deferred. The fund handles all of the administrative details.
conversion privilege
a mutual fund feature that allows investors to mange their funds actively by allowing them to switch their investments from one mutual fund to another within the family of funds
text exempt money fund
a mutual fund that invests the pooled investors money into tax-exempt securities such as municipal securities and securities free from federal income tax.
income property
a type of investment which involves the purchase of real estate property bought with the goal of earning income in the form of rent or lease payments
growth fund
aimed at capital appreciation, best for long term investors willing to accept some risk
automatic investment plan
allows investors to invest a certain set amount of money systematically into a given mutual fun.
systematic withdraw plan
allows investors to receive a automatically receive a certain amount of money on a periodic basis. -created for investors looking for a steady source of income
Open-End Investment Companies
commonly called Mutual Funds, shares are purchased from and sold back to company -New Shares issued as money flows in -Net Asset Value (NAV) is quoted price
equity income fund
composed of high-yield, high grade common stocks along with some convertible securities and preferred stocks
Systematic withdrawal plans
gives current income to owner.
automatic reinvestment plan
gives shareholders the option to reinvest the dividends they earn and capital gains distributions into additional shares of the mutual fund
equity REITs
invest and operate in income producing real estate properties such as apartments, office building, shopping centers, etc.
real estate investment trust (REIT)
invest in both income-producing properties and mortgage loans
international funds
invests solely in foreign securities
mutual fund
is a financial services organization that receives money from its shareholders and invests those funds on their behalf in a diversified portfolio of securities. -Each is a separate organization owned by shareholders but controlled by fund managers
Asset Allocation
spreads investments over all types of securities
value fund
targets stocks that are undiscovered and thus priced below their true value
pool diversification
the process of combining the investment capital of various investors with similar investment goals and then invest them into a diversified variety of investments
net asset value
the value of the maturity fund which is calculated by deducting the funds liabilities from the market value of the funds shares