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