Questions and Answers
What does the 'p' following a mutual fund abbreviation indicate?
What does the 'r' following a mutual fund abbreviation indicate?
What are dividends?
Distributions of a portion of the earnings from the companies whose stock is included in the fund.
What does capital appreciation refer to?
Signup and view all the answers
What is a value fund?
Signup and view all the answers
What is an equity-income fund?
Signup and view all the answers
What is a growth-and-income fund?
Signup and view all the answers
What does an asset allocation fund do?
Signup and view all the answers
What is an international fund?
Signup and view all the answers
What do asset allocation funds depend on?
Signup and view all the answers
What is a growth fund aimed at?
Signup and view all the answers
ETFs generally come with a higher tax liability than mutual funds.
Signup and view all the answers
Shares in a closed-end fund are bought and sold directly from the fund itself.
Signup and view all the answers
Investors can trade shares of an open-end fund on the stock exchange.
Signup and view all the answers
What does NAV stand for?
Signup and view all the answers
What is a growth and income mutual fund's main purpose?
Signup and view all the answers
Diversification is useless and just requires investing in a single stock.
Signup and view all the answers
Diversification is different for which of the following?
Signup and view all the answers
Study Notes
Mutual Fund Fees and Performance
- Mutual funds can charge various fees such as 12b-1 fees, back-end loads, or redemption fees, indicated by specific letters in the fund abbreviation.
- Funds with lower or no fees are generally recommended as charging fees does not guarantee better performance.
Dividends and Earnings
- Mutual funds often provide income through dividends, which are a portion of earnings from underlying stocks.
- Dividends are represented in dollar amounts paid per share; rising share prices lead to capital appreciation and potential earnings upon selling shares.
Types of Mutual Funds
- Value Fund: Focuses on undervalued stocks with potential for growth.
- Equity-Income Fund: Consists of high-yield, high-grade common stocks and some convertible securities.
- Growth-and-Income Fund: Balances current income and capital gains, with an emphasis on capital gains.
- Asset Allocation Fund: Diversifies investments among different asset classes based on a predetermined mix, adaptable to changing market conditions.
- International Fund: Exclusively invests in foreign securities.
- Growth Fund: Aims for capital appreciation, suitable for long-term investors willing to accept risk.
ETFs vs. Mutual Funds
- ETFs have a lower tax liability compared to mutual funds due to less frequent trading and resulting taxable capital gains.
- Closed-end funds are publicly traded and shares are exchanged among investors on exchanges.
- Open-end funds allow direct transactions with the fund, issuing new shares based on demand.
Understanding Diversification
- Diversification spreads risk and provides protection against major losses, but is not deemed useless.
- The approach to diversification varies depending on age, income volatility, and risk aversion.
Mutual Fund Basics
- A mutual fund allows investors to pool their resources to create a diversified portfolio.
- NAV stands for Net Asset Value, a critical metric in assessing mutual fund value.
- Growth and income mutual funds aim to balance current income and long-term capital gains, with inherent risks and volatility.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Explore the essentials of investing in mutual funds, ETFs, and real estate with this flashcard quiz. Learn about fees like 12b-1 and how they affect fund performance in your investment decisions. A must for anyone looking to navigate the investment landscape wisely.
