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4504c3 - Investment Companies In 1992 for first time in U.S...

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Investment Companies In 1992 for first time in U.S. financial history, individuals no longer held a majority of all publicly traded U.S. stocks. However, if one counts indirect ownership, the individual investor controls more than 50% of the stock. Assets in mutual funds grew by more than tenfold in the 1980s to $1 trillion dollars and by June 1999 $6 trillion dollars. Mutual funds owned almost 19% of all US stocks by the beginning of 1999. Household Choices in Saving: 1. Hold liabilities of traditional intermediaries (savings accounts,MMDAs) 2. Hold securities directly 3. Hold securities indirectly Indirect investing refers basically to trading shares of investment companies. Investment Companies Financial organization that sells shares on itself to the public and uses the funds it raises to invest in a portfolio of securities such as money market instruments or stocks or bonds Don’t pay taxes on any distribution if Qualify as a regulated investment company (earns 90% of its income from security transactions) and If at least 90% of its taxable income each year is passed onto the shareholder Must register with the SEC Not insured or guaranteed Types: Managed Closed-end Open-end Unmanaged Unmanaged Funds Unit Investment Trusts Unmanaged, usually fixed income Handled by an independent trustee Redeemable trust certificates Sold at the NAV + small commission
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