Economics Mutual Funds Study Cards

Enhance Your Learning with Economics - Mutual Funds Flash Cards for quick learning



Mutual Fund

A type of investment vehicle made up of a pool of funds collected from many investors to invest in securities such as stocks, bonds, money market instruments, and other assets.

Open-End Mutual Fund

A type of mutual fund that does not have a fixed number of shares and can issue and redeem shares at any time based on investor demand.

Closed-End Mutual Fund

A type of mutual fund that has a fixed number of shares and trades on an exchange like a stock.

Equity Fund

A type of mutual fund that primarily invests in stocks or other equity securities.

Bond Fund

A type of mutual fund that primarily invests in bonds or other fixed-income securities.

Money Market Fund

A type of mutual fund that invests in short-term, low-risk securities such as Treasury bills, certificates of deposit, and commercial paper.

Index Fund

A type of mutual fund that aims to replicate the performance of a specific market index, such as the S&P 500.

Active Management

A mutual fund management strategy that involves actively buying and selling securities in an attempt to outperform the market.

Passive Management

A mutual fund management strategy that aims to replicate the performance of a specific market index, without actively buying and selling securities.

Expense Ratio

The annual fee charged by a mutual fund to cover operating expenses, expressed as a percentage of the fund's average net assets.

Front-End Load

A sales charge or commission paid by an investor when purchasing shares of a mutual fund.

Back-End Load

A sales charge or commission paid by an investor when redeeming shares of a mutual fund.

12b-1 Fee

An annual fee charged by a mutual fund to cover distribution and marketing expenses.

Net Asset Value (NAV)

The per-share value of a mutual fund, calculated by dividing the total value of the fund's assets minus liabilities by the number of shares outstanding.

Securities and Exchange Commission (SEC)

A government agency responsible for regulating the securities industry, including mutual funds.

Investment Company Act of 1940

A federal law that regulates the organization and operation of investment companies, including mutual funds.

Liquidity Risk

The risk that a mutual fund may not be able to sell a security quickly enough to meet investor redemption requests.

Market Risk

The risk that the value of a mutual fund's investments will fluctuate due to changes in market conditions.

Credit Risk

The risk that a bond issuer may default on its payments of interest and principal.

Interest Rate Risk

The risk that the value of a bond or bond fund will decline as interest rates rise.

Inflation Risk

The risk that the purchasing power of a mutual fund's returns will be eroded by inflation.

Tax-Exempt Fund

A type of mutual fund that invests in securities whose income is exempt from federal income tax, such as municipal bonds.

Taxable Fund

A type of mutual fund that invests in securities whose income is subject to federal income tax.

Capital Gains Distribution

The distribution of profits from the sale of securities by a mutual fund, which may be subject to capital gains tax for investors.

Diversification

A risk management strategy that involves spreading investments across different assets to reduce exposure to any single investment.

Dividend

A distribution of a portion of a company's earnings to its shareholders, typically in the form of cash or additional shares.

Load Fund

A mutual fund that charges a sales commission or load fee when shares are bought or sold.

No-Load Fund

A mutual fund that does not charge a sales commission or load fee when shares are bought or sold.

Risk-Return Tradeoff

The principle that higher potential returns are associated with higher levels of risk.

Systematic Risk

The risk that affects the overall market or a large segment of it, such as changes in interest rates or economic conditions.

Unsystematic Risk

The risk that is specific to an individual security or a small group of securities, such as company-specific events or industry trends.

Yield

The income generated by an investment, typically expressed as a percentage of its market value.

Asset Allocation

The process of dividing investments among different asset classes, such as stocks, bonds, and cash, to achieve a desired risk-return profile.