Abstract
Mutual funds represent specific financial units. Their main activity is pooling investors’ money together in order to purchase different financial securities (equities, bonds, commodities, money market instruments and other assets).
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Notes
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2020 Investment Company Fact Book. Investment Company Institute. 2020.
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In the United States, a 401(k) plan is an employer-sponsored defined-contribution pension account.
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Once dividends and distributions are disbursed, the fund’s share price declines by the total of the per—share distribution to the fund’s shareholders. The price falls because the distribution is withdrawn from the fund’s assets, which decreases the net asset value (NAV). Distribution means the portion of capital gains, dividends or interest income from the fund that investors receive periodically. Net capital gain distribution is common for all investors and are received as result of selling of mutual fund holdings. The capital gains are calculated as the difference between the sell price of the stock and its buy price minus operating expenses to get the exact amount of distribution. After paying out the dividends and distributions, the share price of the fund reduces by the total distribution per share among the fund shareholders. Distribution is taken from fund’s assets, so the price falls and the NAV go down.
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Institutional investors aim to invest money on behalf of others and can be represented in the form of a company or organization, with the most common types: mutual funds, pension and insurance companies. Their purpose is to buy and sell huge number of various securities that made them become the whales of Wall Street. They are more sophisticated than individual investors and might be a subject to less restriction in respect to regulation.
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Strict liability is a definition from criminal and civil law area and means legal responsibility of a person for consequences of their activity even with absence of fault or criminal intentions.
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“Invest Wisely: An Introduction to Mutual Funds”. U.S. Securities and Exchange Commission. Retrieved October 28, 2014.
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A surrender charge is a fee levied on a life insurance policyholder upon cancellation of their life insurance policy (from Investopedia).
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The asset turnover ratio measures the value of a company’s sales or revenues relative to the value of its assets. The asset turnover ratio can be used as an indicator of the efficiency with which a company is using its assets to generate revenue. The higher the asset turnover ratio, the more efficient a company is at generating revenue from its assets. Conversely, if a company has a low asset turnover ratio, it indicates it is not efficiently using its assets to generate sales (https://www.investopedia.com/terms/a/assetturnover.asp).
\({\text{Asset Turnover Ratio = }}\frac{\text{Total Sales}}{{\left( {\text{Beginning Assets + Ending Assets}} \right)}}\)
where: Total Sales = Annual sales totalBeginning Assets = Assets at start of yearEnding Assets = Assets at end of year.
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See the section later in this chapter entitled, “Regulation and Operation”.
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FINRA is a not-for-profit organization that—working under the supervision of the SEC—actively engages with and provides essential tools for investors, member firms and policymakers. FINRA provides oversight for the brokerage industry and enables investors and firms to participate in the market with confidence by safeguarding its integrity. https://www.finra.org/rules-guidance/rulebooks/finra-rules.
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Rushinek, A., & Rushinek, S. (1995). Forecasting sales, expenses and stock market values by quarterly financial statement ratio analysis: A microcomputer software development model. Managerial Auditing Journal, 10(2), 7–33.
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Grima, S., Romanova, I., Bezzina, F., & Chetcuti Dimech, F. (2016). Alternative investment fund managers directive and its impact on Malta’s financial service industry.
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The Alternative Investment Fund Managers Directive (AIFMD) is a European Union (EU) regulation that applies to hedge funds, private equity funds, and real estate funds.
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It is widely used to put these codes, but nothing detracts from the fact that asset management companies can define other classes. There is nothing to suggest that certain classes not classified as institutional, due to the fact that commissions are not downgraded (rebates), are in reality aimed at institutional investors.
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In the United States, a 401(k) plan is an employer-sponsored defined-contribution pension account defined in subsection 401(k) of the Internal Revenue Code. There are different types of employee funding: traditional and Roth, or tax-deferred and tax exempt, or EET and TEE. Profits are never taxed in the account, but for tax exempt accounts contributions and withdrawals do not impact on income tax, and for tax deferred accounts contributions are taken from taxable income and withdrawals are added to taxable income.
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An IRA is an account set up at a financial institution that allows an individual to save for retirement with tax-free growth or on a tax-deferred basis.
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References
Bergstresser, D., & Poterba, J. (2002). Do after-tax returns affect mutual fund inflows? Journal of Financial Economics, 63(3), 381–414.
Grima, S., Romanova, I., Bezzina, F., & Chetcuti Dimech, F. (2016). Alternative investment fund managers directive and its impact on Malta’s financial service industry.
Rushinek, A., & Rushinek, S. F. (1995). Forecasting sales, expenses and stock market values by quarterly financial statement ratio analysis. Managerial Auditing Journal, 10(2), 7–33.
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Galloppo, G. (2021). What Is a Mutual Fund?. In: Asset Allocation Strategies for Mutual Funds. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-76128-8_1
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