3531Week11W11 - Week 11 Mutual Funds Investment companies...

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Week 11 Mutual Funds Investment companies and fund types Mutual fund operations Mutual fund costs and fees Short-term funds Long-term funds Mutual fund performance Closed-end funds, exchange traded funds, and hedge funds Registered retirement savings plans Income trusts 1
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Mutual Funds Our goal in this lecture is to understand the different types of mutual funds, their risks, and their returns. Mutual funds are simply a means of combining or pooling the funds of a large group of investors. McGraw-Hill Ryerson Limited 2
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Mutual Funds The buy and sell decisions for the resulting pool are then made by a fund manager, who is compensated for the service provided. Like commercial banks and life insurance companies, mutual funds are a form of financial intermediary . McGraw-Hill Ryerson Limited 3
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Investment Companies An Investment company is business that specializes in pooling funds from individual investors and making investments. McGraw-Hill Ryerson Limited 4
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Fund Types A Closed-end fund is an investment company with a fixed number of shares that are bought and sold by investors, only in the open market . An Open-end fund is an investment company that stands ready to buy and sell shares in itself to investors, at any time . McGraw-Hill Ryerson Limited 5
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Investment Companies and Fund Types 6
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Investment Companies and Fund Types Net asset value (NAV) is the value of the assets held by a mutual fund, divided by the number of shares. Shares in an open-end fund are worth their NAV, because the fund stands ready to redeem their shares at any time. In contrast, share value of closed- end funds may differ from their NAV. McGraw-Hill Ryerson Limited 7
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Mutual Fund Operations O rganization A mutual fund is simply a corporation. It is owned by shareholders, who elect a board of directors. Most mutual funds are created by investment advisory firms (say Fidelity Investments), or brokerage firms with investment advisory operations. Investment advisory firms earn fees for managing mutual funds. McGraw-Hill Ryerson Limited 8
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Mutual funds are required by law to supply a prospectus to any investor who wishes to purchase shares. Mutual funds must also provide an annual report to
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This note was uploaded on 05/01/2011 for the course ADMS 3531 taught by Professor Profp during the Winter '10 term at York University.

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3531Week11W11 - Week 11 Mutual Funds Investment companies...

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