investment company outline

Mutual fund types

·        Stock fund

·        Bond fund

·        Hybrid fund

·        Money market mutual fund

Investment risk

·        Potential for an investment to lose value

·        High risk-chance of loss is high but potential for high return

Investment risk profile

·        Suitability of customer for different types of investment by how much risk they can afford to take

Investment Company act of 1940

 

Diversified investment company:

·         75% of assets invested so no more than 5% of total assets invested in one company at any time,

·        investment co. can NOT own more than >10% of outstanding voting stock of one company

·        (75-5-10)

Specialized investment company

·        Do not pass go-diversified investment co. objectives unmet

·        A.k.a. sector fund-invest in one type of industry

·        Good for young people

·        Bad for elderly/retirees

Which of the following best describes a “diversified” investment management company?

·        75% of the investment company’s assets invested so no more than 5% invested in any one co.

·         fund can NOT own more than 10% of outstanding shares of another co.

Stock funds:

Growth fund

·        growing well

·        low dividend

·        re-invest profits in growing company.

·        NAV may increase

·        Aggressive-buy new companies with potential for rapid $ money making, good for young people in their 20s and 30s

·        Conservative-buy well established companies with potential for $ money making, for middle aged investors-40s/50s

Other stock funds:

·        Growth and income fund

·        Global equity fund

·        Income equity fund

·        International fund

·        Regional equity fund

·        Sector equity funds

Bond funds

·        Buy muni and corporate bonds

·        Goal: wealth preservation

·        Goal: asset preservation

·        High rated bonds, secure, may not lose principal

·        Interest rates decline, value increases

·        Interest rates increase, value decreases

·        Interest rates increase, NAV decreases

Types of bond funds

·        Corporate-buy debt of corporations why: income first, next safety of principal

·        Government, safety of principal, next income

·        Municipal bond fund-want tax free income

·        Tax free bond funds-good for high tax bracket, can lose principal value if interest rates increase

Bond term lengths

·        Short term

·        Intermediate term

Hybrid funds:

Balanced fund

·        Buy bonds and stocks

·        To preserve principal

·        To get dividends and interest

·        To get long term growth

·        For people close for retirement

Venture capital:

·        Invest in new companies

·        Don’t need to buy new issue

Money market funds

·        Buy short term debt securities-

·        Buy commercial paper

·        Buy banker’s acceptances

·        Buy repurchase agreements

·        Buy T-bills

·        Buy negotiable CDs

·        NOT non-negotiable CDs

·        Securities mature in less<30 days

·        Gives buyers credit interest daily

·        Short term investment

Newspaper footnotes

·        P, 12-b-1 fees-charged

·        R,  redemption fees or contingent deferred sales charges-charged

·        T, 12-b-1 fees + redemption fees-charges

·        NL, no-load mutual fund, no transaction cost