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SIE Final review 2 - Coggle Diagram
SIE Final review 2
Types of funds
Mutual funds
Sector Funds: Specialized mutual funds focusing on one industry / Less diversified → higher risk if that sector underperforms
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Closed-End Funds
Issue a fixed number of shares (may issue common, preferred, and bonds)
After the IPO, shares trade in the secondary market (like a stock)
Price is set by supply & demand, may trade at premium/discount to NAV
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For closed-end & ETFs, NAV is reference value, but trading price may differ.
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Settlement dates
Equities
Stocks, corporate bonds, munis = T+2 (trade date + 2 business days)
Options
(the contracts themselves): T+1 (trade date + 1 business day); f you buy/sell an option contract, the cash/contract settles the next day
Option Exercise Settlement: When an option is exercised, the underlying security is delivered; Equity Options (stock) = Settlement = T+2 (because stock is being delivered)
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Dividends
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Stock Dividends: Not taxable when received; result in more shares at lower price (cost basis adjusted)
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Margin account:
requires: Credit Agreement: Terms of loan., Hypothecation Agreement: Pledges securities as collateral, Loan Consent Form: Allows firm to lend securities (optional)
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Minimum Equity Requirements: <$2,000 purchase = full amount due, $2,000–$4,000 purchase = at least $2,000, $4,000 purchase = 50% Reg T requirement.
Partnerships
Structure: Pass-through vehicles → the partnership reports to the IRS but is not taxed at the entity level. ncome/losses flow through to investors.
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Risk Concepts
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Unsystematic/ Selection risk: Risk that an investor chooses the wrong security, sector, or market at the wrong time.
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Orders:
By default, all orders are Day Orders (cancel at end of day unless customer specifies otherwise)
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