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Unit 4: Investment Companies - Coggle Diagram
Unit 4: Investment Companies
Classification of Investment Companies
Face-Amount Certificate Companies (FACs
) :pen:
Def: Face-amount certificate companies issue debt securities at a discount and promise to pay a fixed amount (the face amount) at maturity.
Unit Investment Trusts (UITs)
:pen:
Def: UITs are investment companies that sell redeemable shares (units) in a fixed portfolio, often of bonds or stocks, and are unmanaged after their initial setup.
Fixed UIT
Nonfixed UIT
Management Companies
:pen:
Closed-End Investment Companies
ex: S&P 500 Index Trust ETF
Diversified
Nondiversified
Open-End Investment Companies (Mutual Funds)
....
ex: Growth fund option for a VA
Diversified
Nondiversified
Investing in Mutual Funds (Open-End Investment Companies)
Mutual Fund Share Classes
Class C Shares - Level Load
No-Load Shares :pen:
Class B Shares - Back-End Load
Class A Shares - Front-End Load
Reducing Front-End Loads
Mutual fund Class A shares have a lot of advantages
Breakpoints
Letter of Intent LOI
Exchange Privilege
Rights of accumulation
Combination Privilege
Dividend distribution important dates
Declaration date, Record date, Ex-dividend Date, Payabale Date :pen:
Taxation
Conduit Theory :pen:
Definition and characteristics
Net Asset Value and Forward Pricing
Calculating Net Asset Value
NAV Formula::star:
Liabilities and the Expense Ratio
Forward Pricing
Forward Pricing
Orders are executed at the next computed NAV (typically after market close, 4:00 PM ET).
Mutual funds use forward pricing to ensure fairness, meaning investors get the next available NAV, not a previously known price.
Public Offering Price (POP)
POP = NAV + Sales Charge (for Class A shares)
POP is what the investor pays, NAV is what the fund is worth.
Dividend Payments
Reinvestment of Dividends :pen:
Pricing of Mutual Funds
Disclosure Documents and Conduit Theory
Full (Statutory) Prospectus
Standardized performance data :pen:
Summary Prospectus (Rule 498)
Statement of Additional Information (SAI)
Omitting Prospectus
Conduit Theory (optional sub-branch)
Annuities
Variable Annuities
:pen:
Annuitization
The phase where the contract converts into income payments, either for life or a set period.
Tax Deferred
Held in Separate account
Relating the Suitability Requirements When Recommending a Variable Annuity
Variable annuities are complex and long-term products, so suitability requirements ensure that clients understand features, costs, and risks
.
Tax Rules for Variable Annuities
Taxing Annuitization :pen:
Taxing Lump Sum Withdrawals :pen:
Taxing Partial Withdrawals :pen:
Fixed Annuities
:pen:
Tax Deferred
held in General account
Investment companies
defined and regulated under the Investment Company Act of 1940
Pooling
Structure and Funding
Raise Capital by Selling Shares
Make money by charging fees