Funds & Packaged Products
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Terms in this set
- Mutual Funds (Open-End) Investment companies that continuously issue and redeem shares at net asset value (NAV); orders are priced at the NEXT calculated NAV (forward pricing), and shares are redeemed by the fund itself, not traded between investors.
- Share Classes & Sales Charges Class A shares charge a front-end load reduced by breakpoint discounts at higher purchase levels; Class B carry a declining back-end charge (CDSC); Class C charge a level annual fee; 12b-1 fees cover distribution costs in all classes.
- Closed-End Funds Investment companies that raise capital once in an IPO of a fixed number of shares, which then trade on exchanges at market prices that can sit above (premium) or below (discount) NAV.
- Exchange-Traded Funds (ETFs) Funds — most tracking an index — whose shares trade on exchanges all day at market prices; an in-kind creation/redemption mechanism keeps prices near NAV and adds tax efficiency.
- Unit Investment Trusts (UITs) Investment companies that assemble a fixed, unmanaged portfolio for a set life and sell redeemable units; there is no board of directors, no investment adviser, and no ongoing trading of the portfolio.
- Variable vs. Fixed Annuities Insurance contracts for retirement income: a fixed annuity guarantees payments from the insurer's general account (insurance product, not a security); a variable annuity invests in separate-account subaccounts, so payments fluctuate — making it a security requiring registration and a prospectus.
- REITs Companies that own or finance income-producing real estate and pass income to shareholders; to avoid corporate tax a REIT must distribute at least 90% of its taxable income, which is why REIT dividends are taxed as ordinary income.
- 529 Plans & ABLE Accounts Municipal fund securities (regulated by the MSRB): 529 college savings plans grow tax-deferred with tax-free withdrawals for qualified education expenses; ABLE accounts do the same for disability-related expenses.
- Hedge Funds & DPPs Private, lightly regulated vehicles: hedge funds pool accredited investors' money for flexible, often leveraged strategies with lock-up periods; direct participation programs (limited partnerships) pass income and losses straight through to investors.