McGraw-Hill/Irwin
Definitions
Investment company: Financial intermediaries Net asset value (NAV): Assets minus liabilities
per share
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net value
Closed-end fund: Shares cant be redeemed,
fund
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Differences
Shares Outstanding
Closed-end: No change unless new stock offered
discount to NAV
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14.64
14.70 18.75 18.64 6.08 32.71 9.58
13.46
13.82 17.19 16.58 6.10 28.26 9.65
8.06
5.99 8.32 11.05 0.33 13.60 0.73
25.17
49.28 29.89 43.52 48.48 30.93 38.93
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estate loans
Hedge Funds
Private speculative investment pool, exempt from
SEC regulation
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Equity funds
Invest in stock, some fixed-income, or other securities
Bond funds
Specialize in fixed-income (bonds) sector
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including U.S.
International funds invest outside U.S.
Regional funds focus on particular part of world Emerging market funds invest in developing
nations
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proportion Life-cycle funds: Asset mix ranges from aggressive to conservative Static allocation funds maintain stable mix across stocks and bonds Targeted maturity funds become more conservative as investor ages Funds of funds: Mutual funds that primarily invest in other mutual funds
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market forecast
Index funds
Try to match performance of broad market index Buy shares in securities included in particular index in
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Percent of Total Assets 24.2% 13.8% 16.2% 54.2% 2.5% 1.3% 0.7% 1.7% 4.7% 1.3% 1.8% 14.0% 5.9% 22.0% 3.9% 25.8% 100.0%
Number of Funds 3,037 968 762 4,767 293 206 122 301 370 451 224 1,967 488 548 259 807 8,029
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2,912 1,660 1,950 6,522 301 157 84 203 560 156 218 1,679 713 2,642 465 3,107 12,021
shares
12b-1 charges: Annual fees charged by mutual
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performers
12b-1 charges should be added to expense
ratios
Compare costs with Morningstar
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Notes: a Depending on size of investment. b Depending on years until holdings are sold. c Including service fee of .25%.
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Notes: Fund A is no-load with .5% expense ratio, Fund B is no-load with 1.5% total expense ratio, and Fund C has an 8% load on purchases and a 1% expense ratio. Gross return on all funds is 12% per year before expenses. * After front-end load, if any.
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distributed
Investor taxed on capital gain and dividend
distributions
Turnover: Ratio of trading activity to assets of
portfolio
Portfolio turnover may affect investors tax
liability
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expenses)
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Figure 4.4 Average Returns on Diversified Equity Funds vs. Wilshire 5000 Index
50% 40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
-50%
1979
1990
1971
1972
1973
1974
1975
1976
1977
1978
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Wilshire return
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2010
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