Personal Finance Chapter 14
Index Funds
Are mutual funds that try to match the performance of a particular index by investing in companies included in the index.
Income Funds
Are mutual funds whose investment goal is to buy bonds that produce income in the form of interest.
Growth Funds
Are mutual funds whose investment goal is to buy stocks that will increase in value over time.
Real Estate Investment Trusts
(REITS) are similar to a mutual find. It is a corporation that pools the money of many individuals to invest in real estate. It makes all the buy and sell decisions.
Mortgage
Is a loan to purchase real estate
Back End Load
Is a sales charge paid when you sell an investment.
Front End Load
Is a sales charge paid when you sell an investment.
Vacant Land/Unimproved Property
Is a speculative investment. Banks are usually not willing to make loans on this type of land.
Index
Is an average of the price movements of certain selected securities. They are used as benchmarks (comparison point) to judge how well an investment is doing.
Duplex
A building with two separate living quarters. The owner has the same responsibilities to renters as the owner of a single family home.
Mutual Fund
A professionally managed group of investments bought using a pool of money from many investors.
Cost and Fees
AKA a load, and they are charged when buying a mutual fund through a broker.
Trustee
Appointed by investors for indirect investments to hold legal title on behalf of all investors in a group. They manage assets for someone else.
Collectibles
Are collections of valuable or rare items. They are valuable because they are old, no longer made, unusual, irreplaceable or of historic importance. Coins are the most commonly collected items. They are hard to sell.
Futures
Are contracts to buy and sell commodities or stocks for a specified price on a specified date in the future.
Participation Certificates
Are investments in a pool of mortgages that have been purchased by a government agency.
Global Funds
Are mutual funds that purchase international stocks and bonds as well as US securities.
Professional Managers
Buy and sell according to their interpretation of market conditions, trends, and other factors.
Fluctuations
Can affect the value of global stocks. This makes global funds generally more risky than US stocks funds.
Quad
Four units
Federal Home Loan Mortgage Corporation
Freddie Mac
Government National Mortgages Act
Ginnie Mae
Precious Metals
Gold, Silver, and Platinum. Can be in the form of coins, medallions, jewelry and bullion. Their prices swing widely over time which makes them a risky investment. There is a small unpredictable market.
Condominium
Is an individually owned unit in an apartment style complex with shared ownership of common areas.
Prospectus
Is detailed information about the funds. It is a legal document that offers securities or mutual fund shares for sale.
Real Estate
Is land and any buildings on the land.
Commercial Property
Is land and buildings that produce lease or rental income.
Option
Is the right but not obligation to buy or sell a commodity or stock for a specified price within a specified period of time. Risky and not for inexperienced investors.
Call Option
Is the right to buy 100 share of stock as a set price by a certain expiration date.
Put Option
Is the right to sell stock at a fixed price until the expiration date.
Commodities
Include farms products such as wheat, corn, and cattle, and metals such as gold and silver.
Money Market Funds
Invested in safe, liquid securities such as Treasury Bills and bonds that mature in three weeks to six months.
Depreciation
Is a decline in the value of property due to normal wear and tear.
Real Estate Syndicates
Is a group of investors who pool their money to buy high priced real estate.
Recreation/Retirement Property
May be in the form of second homes for vacations or retirement. The owner may rent the property to others during times when they are not there.
Gems
Natural precious stones such as diamonds, rubies, sapphires and emeralds. Their prices are high and subject to drastic change. There is a small unpredictable market.
Family of Fund
Offered by most mutual fund companies. It is a variety of funds covering a whole range of investment objectives.
Zoning Laws
Real estate is subject to these. They regulate what type of structure can be built in each area of the city.
Fund Investors
Share in profits made by the mutual fund. They receive profits as dividends and as capital gains which can be reinvested.
Balanced Fund
Their goal is to earn returns from current income and capital gains. They have a moderate risk.
Triplex
Three units
Futures Market
Was created for those who want to know in advance what they will be paid. Farmers enter this market for protection against volatile prices.
No Load Fund
Which means a sales fee is not charged because salespeople are not involved. This happens when the mutual fund is purchased directly from the investment company.
Liquidity
You can get your money quickly if you need it.